Stock Market Price Volatility Of Monetary Policy Analysis

The China stock market has been developing rapidly in the late 90s of 20th century. The fluctuation of stock price has become the challenge to our country' s traditional monetary policy. Although the government and many scholars have started to observe the relevance between stock price and the monetary policy, researches on this field were just conducted and not systematic. So the writer will do further research on the co-influence between the stock market and monetary policy, especially the effect ion of fluctuation in stock price on the process of monetary policy. The instant development and the increase of stock price usual will raise the demand of money, but the unsteady price will result in the un-stabilization in the demand of money. The fierce change of stock price will strengthen the internal causes of money multiplier; weaken the stabilization and forcastable of money multiplier. Its effect on money supply is weakening the controbility and forcastability of money supply also the connection to the domestic economics. Since the stock market and the stock price enhance the unsteady in the demand, the multiplier and the supply of money, the ability of central bank has been weakened, the affection of monetary policy has become uncertain.This paper empirically analysis that the China stock market and the fluctuation of stock price effect on the monetary policy, and give some suggestion to the decision about monetary policy.The structure of this paper: 5 chartsThe first chart mainly introduce the changing of western monetary policy theory and practice, discuss the final purpose of monetary policy, focus on how to set the intermediary aim and the quality the aim should has (measurable, controllable, relative), compare the different qualities in supply of money, interest rate and exchange rate as intermediary aim, finally introduce the functional tools of monetarypolicy.The second chart discuss the affection of monetary policy on the stock price. One side, the monetary policy (as the changing of interest rate) directly change the rate of stock, cause the prices of several assets changing, then effect on the capital, at the end influence the price of stock. Other side, through interest rate, exchange rate, credit, price of assets etc. the monetary policy effect on the real economics indirectly, change the foreseen of market candidate, and stock price reflect the foreseen.The third chart is about the affection of stock price on monetary policy. It detailed discusses the influence of stock price on the demand of money, on the money multiplier and flow rate of money, on the final purpose of monetary policy, on the conduct system of monetary policy.The forth chart empirically analysis the relevance between China monetary policy and the stock-market price. Firstly it introduces the developed process of the China stock market and the condition of money supply. Secondly, it uses the static software as SPSS and EVIEWS to study the mutual influence of price and policy. The regression result is: the variation of macroeconomic variations cannot explain the changing of the China stock market, the borrowing rate between banks and buying-back rate of national debt can effect the stock market, but their explanation is weak. The last section of this chart is about an expanded research. It empirically analysis the affection of stock price on domestic economics. The regression result shows that stock market have the positive infection on domestic market and the affection would be seen after one year.The fifth chart suggests the Central bank of China should give up money supply quantity as the intermediary aim and take the money function frame of staring-at-the-inflation-rate to create a system of staring-at-the-inflation-rate, through analyzing the new trend ofpresent foreign monetary policy.In the conclusion, it show that the weak relevance between China monetary policy and stock market is due to the ill-market factors, the conduction way of monetary policy in stock market is blocked. So China should continue...