The Empirical Research Of The Transmission Effect Of Monetary Policy Based On The Stock Market

As one of the macroeconomic regulation and control means, the essence of monetary policy acting on the real economy lies in the mutual adaptation between money demand and money supply. Because the decision of money demand and money supply is closely related to concrete macroeconomic environment, the change of macroeconomic environment must influence the effect of monetary policy. Seen from present actual conditions of our country, the largest change of the macroeconomic environment is the development of the stock market; seen from actual effect of the monetary policy of our country, the stock market has already had an obvious impact on it, so the research of the monetary policy of our country under the stock market is quite essential. In fact, the stock market has already become a transmission of monetary policy. The result of the positive research about the influence of the stock market on consume and investment indicates that this transmission doesn't fluent. The influence of the stock market on money supply lies in that it strengthens the endogenesis of money supply, so the ability of the money controlling by the Central Bank becomes to weak. Base on the models of M1 and M2, the stock market can influence money supply through the currency rate, the excess reserve rate, the required reserves rate, the ratio of quasi money to deposits by enterprises and the base money. The way, the direction and the degree of the influence on it are related to the stock market. The result of the positive research of our country indicates that the endogenesis of money supply is being strengthened because of the development of the stock market. In respect of the money demand, the primary stock market and the secondary stock market also can influence it. In respect of the money demand, the primary stock market and the secondary stock market also can influence it. In the primary stock market, the requirement of funds being frozen at the moment of issuing new stocks impacts greatly on money demand. The influence of the secondary stock market on money demand is realized through stock price, and this influence works through three kinds of effects mainly, namely the wealth effect, the trading effect and the substitution effect of the stock market. Seen from present actual conditions of our country, this influence mainly reflects on the trading effect of the stock market, so this influence on money demand mainly reflects on M1 of narrow sense. The result of the Vector Error Correction Model about the influence of the secondary stock market on money demand indicates that this influence is obvious at present of our country. Seeing the important influence of the stock market on money demand, and the high fluctuation of the stock market, therefore, the policy meaning of the stability of money demand function has already dropped in the traditional monetary policy frame. The development of the stock market strengthens the endogenesis of money supply, leads to the instability of money demand function, and also weakens correlations among money supply, income and prices, so money supply as intermediate goal may be inappropriate. Finally, the article proposes some ways about the transmission of monetary policy of the stock market in our country. The article suggests that the rate of inflation should be selected as intermediate goal, at the same time takes the stock market into account.