The Equilibrium Analysis Of Stock-market,Money Market And Product Market In China

What's the relationship between stock-market and economy? If money market involved , what the special features occur? In this dissertation , basing on the general equilibrium approach, we combine the partial equilibrium analysis approach with the general equilibrium analysis and take the stock-market into IS-LM model, so as to illustrate the long and short interaction among the stock-market, product market and money market with Vector Error Correction Model.The general equilibrium results show us that the rational economy and perceptualstock-market......merge if dispersing longer, and disperse if merging longer" .In theshort term, stock-market and economy run in the opposition directions ,while in the long run the interaction mechanism make the three markets converge into a plane .The reasons that the stock-market and economy run counter to each other lie in two factors: one is that the stock-market doesn't do what it should do, the other lies in the "Policy Market" ,and the government' interference can support the stock-market in the short term ,but accelerates the stock-market's fluctuation in the long run ,which undermines the stock-market's development. But the interaction of the three markets make them converge to their equilibrium position, which is determined by the cyclical operation law of the stock-market and product market, and the fluctuation of stock-market and product market is the result of their adjusting to the equilibrium position.Integrating the partial equilibrium into the general equilibrium analysis, we know that the "wealth effect" is less than the "substitute effect" in the stock-market, so that it have the negative effect on the economy. Take the effect that the stock-market have on consume into account, the "wealth effect" exists in some extent in China, but remains very limited at present. At the same time, the profit the stockholders gain from the stock-market often invests again in the stock-market, so the "wealth effect" is subtracted. In addition , when we focus on the effect the stock-market have on the investment, we can see that the fund that raise from the stock-market haven't been used efficiently, so the stock-market has the negative effect on the investment, which aggravates the "substitute effect".On the money market, the development of stock-market produces the transaction demand in some extent, and the "substitute effect" occurs when the stock continues drop.When the effect the economy and monetary market take into consideration, we know that: increasing on money supply will impel the stock price in the short term, but in the long run it has the negative on the stock-market, lowering the rate will increase the stock price either, and the economy supports the stock-market in the short time and determines the development of stock-market in the long term.