Stock Market Wealth Effect And Assets Substitution Effect On Money Demand

The effect of stock market becomes more and more important in studies of money policy and money demand,more and more attention has been paid to this field. This paper is based on analysis of stock market and money policy relationship,with the endogenous money supply theory as its precondition.The paper mainly study influence of stock market on money demand through two special channels: wealth effect and assets substitution effect. It focuses on trying to describ relationship of stock market and money demand in "micro aspects of macro-economy". In order to give a comprehensive description of the relationship, currency circulation velocity is discussed at last.Results show that in our nation stock market wealth effect is negative,while assets substitution effect is not notable,but that dosen't mean stock market effect on money demand and money policy can be ignored, more details in the results bring new hope that stock market dose has impact on money demand in some way and will have more in the future.