Empirical Study On The Impact Of Multi-level Money Supply And Interest Rate On Stock Price In China

With the increasing prosperity of China's economy,China's stock market is not only a channel for residents to invest and finance,but also the main force of macroeconomic stability.As an important part of macro-economy,the vigorous development of stock market not only promotes the development of our modern financial system,but also strengthens the endogenous motive force of our economic development through efficient capital agglomeration,which further promotes our macro-economic development.However,under the trend of economic globalization,China's stock market is facing great challenges in the face of changing domestic and international situations.In the face of the abnormal fluctuations in the domestic stock market and the instability of the financial system,The Central Bank of China has repeatedly used monetary policies to regulate money supply and interest rate gates and maintain the stability of China's stock market and the real economy,such as reducing interest rates,raising reverse repurchase rates,open market short-term liquidity adjustment tools(SLO),medium-term lending facilities(MLF),Pledged Supplementary Lending(PSL).In recent years,the research on the impact of monetary policy on stock market has become a hot issue in the field of macroeconomic research.A large number of studies also show that the proper use of monetary policy transmission mechanism in stock market,such as interest rate transmission,asset portfolio,inflation and price expectation effect,will not only help macroeconomic regulation and control of stock market,but also help promote the stable development of the macro economy.This paper aims to explore the influence of China's multi-level money supply and interest rate on stock price from the frequency field.Firstly,after referring to the relevant literature at abroad and domestic,this paper makes a thorough analysis of the stock market transmission mechanism of monetary policy;secondly,it makes a theoretical and descriptive analysis of the impact of money supply and interest rate on stock price in China,and finds that different levels of money supply and interest rate have significant predictability and trend on stock price in different periods.Thirdly,based on the monthly data of China from January 1997 to December 2016,this paper empirically analyses the impact of different levels of money supply(M1,M2)and interest rate(R)on stock prices(SHS,SZS)by using frequency domain Granger causality test,ADF test,PP test and vector autoregressive model.Fourthly,through the stability test of Chow model,it is found that there are breakpoints of interval structure in the model,so the interval test of subsection samples is carried out.Finally,combined with the test results of the whole sample interval and the subsection sample interval,this paper comprehensively analyzed the influence of money supply and interest rate on stock price.The empirical results show that since the reform and opening up,the relationship between money supply,interest rate and stock price has changed structurally.In different sample intervals,there are significant effects of money supply and interest rate on stock price at different levels in China,and the change of money supply M1 affects stock price in the short term(high frequency),while the change of money supply M2 affects stock price in the medium and long term(low frequency),but the significant level of interest rate change on stock price is low.Therefore,combined with empirical research,this paper puts forward relevant policy suggestions from the choice of intermediary target of monetary policy,response cycle of policy impact,interest rate marketization reform and linkage effect between capital market and monetary market.