The Empirical Analysis Of The Shanghai Composite Index's Reaction To Our Country's Monetary Policy

As the increasingly deep of economic globalization and fast development of financial innovation, the role of the stock market in many countries get gradually strengthened in national economic entity. Our countries' stock market started late, and get rapidly development in recent years, but have surged into extreme phenomenon, which brings adverse effects on the stable of China's financial industry and healthy development of the real economy. Although the stock market produced the positive role to monetary policy transmission effect, it brings challenge to the policy implementation effect, monetary authorities need to carefully consider the influence of the stock market and formulate the reasonable policy when set monetary policy. The central bank use monetary policy aim to the stock market for many times, but the effect often less ideal, and took suspicious of the effectiveness of the policy.Today, the study of the relationship between monetary policy and the stock market is the relatively inattentive by the scholars at home and abroad, for involves two area of research of monetary economics and finance economics. it often limited the width and depth of the study when focus too much on research in one field of method. And they often focused on whether the transmission channel is obstructed in research of monetary policy transmission mechanism and so on. and it is rarely for research on new financial environment.Based on the summarization of the former research foundation, this paper proof the relationship between our countries' monetary policy changes and the stock market fluctuation for both theoretical and empirical method in detailed, and proceed deep analysis. First of all. this paper review and summarize the related literature research methods at home and abroad. Then, expound on some of the classic theory of monetary policy, analyze transmission mechanism to the stock market by monetary policy briefly.In the empirical part of the article, this paper mainly divided into two ways:(1) to use the quantitative research methods of vector error correction model (VECM) first, analyze the stock market effect by expectational monetary policy changes, the result shows that the explanatory of policy indicator including M2 and bank lending rate to the change of the stock market index is not significant, generally lower than the consumer price index CPI and social total retail sales of consumer goods; (2) use of the basic thinking of event study, and the GARCH-M model for the tool, research the announcement effects on the stock market of the adjustment of the legal deposit reserve rate and the one-year benchmark deposit interest rate. Research found that compared to expectational monetary policy, the announcement effects to the stock market by the change of discrete monetary policy is relatively significant and more explanation. And adjust the rate of deposit reserve rate is more effective than to adjust benchmark deposit interest rate.Finally, according to the empirical research results and combined with the actual situation in our country, I put forward some specific policy recommendations.