The Impact Of Monetary Policy On China's Stock Market

After the reform and opening up,with the prosperity of our economy and the vigorous development of the capital market,the stock market as an important part of the capital market,increasing volume,as at the end of august 2016,the total market capitalization of Shanghai Stock Exchange and Shenzhen Stock Exchange listed companies reached 49437.602 billion yuan,accounting for 73% of GDP,the stock market not only provides direct financing channels for investors,but also provides investors with important investment channels.However,since the beginning of the new century,China's stock market has experienced a number of ups and downs,and its instability has caused investors to suffer heavy losses and hindered the development of the real economy,frequent fluctuations in stock prices have become the focus of monetary authorities,also have an important impact on the development of monetary policy.At present,the influence of monetary policy on stock market is relatively concentrated on the estimation of linear model,although the nonlinear model has been used in recent years,it is limited to smooth transition vector error correction model and Markov regressive vector autoregressive model,both nonlinear models focus on the conversion of non-linear mechanisms,and lack of effective testing of global time-varying properties of model parameters.In view of China's economic development changes over time,the economic structure and other factors are constantly changing,the linear and nonlinear models can not depict the dynamic change of the impact of China's monetary policy on the stock market,nor can we consider the time-varying effect of the model in the global sample,the innovation of this paper is to consider the gradual and abrupt change of China's economic structure,using time-varying parameter vector autoregressive model(TVP-SV-VAR)with stochastic volatility to study the relationship between money supply,interest rate and stock price,and the monthly data from January 2002 to August 2016,the paper focuses on the time-varying characteristics of the impact of money supply and interest rate changes on stock prices.The results show that the influence of money supply and interest rate on stock price is time-varying,and the direction and size of the influence are uncertain,and the lag effect is short-term.The positive impulse response of the stock price to the interest rate and the negative impulse response of stock price to money supply are contrary to the economic knowledge.The influence of the money supply to the stock price isobviously greater than that of the interest rate.Finally,this paper puts forward some policy suggestions,such as advancing the process of interest rate marketization,strengthening the linkage effect of money market and capital market,perfecting relevant laws and regulations of stock market and optimizing the investor structure of stock market in our country.