The Research on the Monetary Policy Transmission Mechanism of the Stock Market
|School||Dongbei University of Finance|
|Keywords||monetary policy transmission mechanism cointegration test vector error correction model|
In this day and age, the relationship between stock market and monetary policy has attracted wide attention, mainly because of the improving of the status of the stock market, its changing of the financial structure and the threaten to the stability of the financial system caused by the stock market bubble. With the development of globalization, the stock market is playing an important role in the nation’s economy. Although the stock market in our nation was not established long time, it has developed rushly fast. Our stock market has impacted the economy profoundly and has challenged the traditional monetary policy severely. Also, stable financial system is the foundation of the financial market operation and the basis for monetary policy. Therefore, in order to better operate the monetary policy, the central bank can not ignore the important factor in stock market volatility.The paper first collect and analysis domestic and international research literature. The international research does not apply to Chinese market as the domestic stock markets research is not yet mature, while domestic research does not fully explain the stock market transmission mechanism, mostly only focus on one aspect. The main part of this paper fully analyze the impact of monetary policy on the transmission mechanism of monetary policy aspects, which mainly includes two aspects:firstly, how the monetary policy transmits to the stock market, and secondly, how the stock market transmits the monetary policy information to the real economy. For the two parts, this paper combined the theoretical and empirical analysis and focusing on the way of empirical analysis. When analysis how the transmission of monetary policy to the stock market, this paper choose two main indicators----money supply and interest rates. The stock market impacting on the real economy is divided into two ways----consumption and investment. In the theoretical analysis, the impact of interest rate on the stock market mainly from the substitution effect, expected effect and cost-effectiveness to analysis, and money supply major from effect of the price; The impact on consumption mainly from the wealthy effect and liquidity to analysis, and the analysis of investment mainly from the Tobin q theory and the balance sheet effects. In the empirical analysis section, the paper mainly use the modern econometric method to dynamic analysis, for example, unit root tests, Granger causality test, cointegration test and vector error correction model and etc.. When analysis the effects of our current conclusion, this paper use the theoretical analysis. The results show that the transmission of monetary policy on the stock market is not relatively smooth. In the indicators of monetary policy, the deposit interest rates is the major impact on the stock market; In the part of the impacting on the real economy, the mechanism is more smooth in the consumption than in the investment. The impact on investment is not obvious, but the trend is increasing.The main work of this paper is the systematic analysis of the monetary policy transmission mechanism in the whole process----how the monetary policy transmits to the stock market, and how the stock market transmits the monetary policy information to the real economy of the stock market. In the analysis method, to avoid the result of pseudo-variables regression problem caused by economic instability using the traditional multiple linear regression, the paper mainly use time series dynamic analysis. In the data selection, the sample is end to the April 2010. Using the latest data to analysis the effects on the current conduction in China’s stock market has a different understanding on the relationship between the monetary policy and the stock market.