| Adequate stock market liquidity is an important feature of a well-functioning macroeconomy,and monetary policy,as a determinant of market liquidity,can stabilize the stock market by using active monetary policy tools despite the fact that changes in stock market liquidity make monetary policy transmission relatively complicated,improve the coordination between improving monetary policy and financial market regulation and operation,and enhance monetary policy in special periods to support financial market stability and prevent systemic financial risks.How much impact do quantitative and price-based monetary policy tools have on the liquidity transmission in China’s stock market at different stages of economic operation? What are the differences in the effects of quantitative and price-based monetary policies on the liquidity of the A-share market? What is the path of monetary policy transmission to A-share market liquidity? These are important questions that need to be addressed by academia and industry in China.In this paper,we examine the role of quantitative and price-based monetary policy instruments in the transmission process of liquidity in China’s A-share market,explore the transmission mechanism and impact effects between them,put monetary policy and stock market liquidity in a holistic research framework,and explore the relationship between monetary policy and A-share market liquidity in a systematic time-varying framework at both theoretical and empirical levels.First,a time-varying parametric TVP-SV-VAR vector autoregressive model is developed in a dynamic time-varying framework to explore the effects of quantitative and price-based monetary policy instruments on China’s A-share market liquidity in a systematic time-varying framework.Secondly,the MS-VAR model is used to identify the period in which China’s stock market liquidity is located,to classify the different regimes in which stock market liquidity is located,and to measure the effect of monetary policy on the regulation of China’s stock market liquidity through event analysis corresponding to the liquidity period.The main findings are as follows: firstly,quantitative monetary policy has a positive relationship with the current period response to stock market liquidity,and the role of money supply on stock market liquidity is highly time-varying,with an increase in money supply favoring the improvement of stock market liquidity,indicating that quantitative monetary policy is predominantly positive in the transmission effect of stock market liquidity,with the shock effect showing an inverted " V-shaped",which gradually strengthens over time.Second,price monetary policy is negatively correlated with the current response of stock market liquidity,and price monetary policy is timevarying in affecting stock market liquidity.Third,in order to better reflect the actual regulation of monetary policy on the stock market,the impact of monetary policy on stock market liquidity is analyzed based on the MS-VAR model.The results show that the cumulative impact of quantitative monetary policy is higher than that of price-based monetary policy when the stock market is in the stable and depressed liquidity regime.The cumulative impact of price-based monetary policy is greater than that of quantitative monetary policy when the stock market is in the liquidity inflation regime. |
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