The Empirical Study About The Impact Of Monetary Policy Adjustment To Stock Index

Since the implementation of market economy reform, China’s real economy inmarket economy drive has gained huge success. As an important component of theeconomic development, the stock market is gradually showing its value withdevelopment and perfection. So, China’s monetary policy is both affect the realeconomy and the stock market. Multiple examples of using monetary policy to adjustthe stock market in the world scope illustrate that the monetary policy on the stockmarket have a certain role. Therefore, the influence of monetary policy on stockmarket research has become a very popular topic. Long-term since, our country stockmarket was in the exploration and reform in advance, but it had been named policymarket due to certain reasons. In order to solve the problem which is not conduciveto the development of China’s stock market left over by history, China began toimplement the reform of non-tradable shares in 2005 May. And this action has theepoch-making significance to the Chinese stock market and is the watershed of theChina’s stock market development.In this paper, an empirical analysis of the monetary policy adjustment on stockmarket in the short and long term effects is made. Correlation analysis is used in theshort term effects and we find the interest rates and deposit reserve ratio on theimpact of the stock market is weak. In the analysis of long-term effects, in order tostudy the different effect of monetary policy on the stock market before and after thenon-tradable share reform, this paper has selected sample data of two times from2001 January to 2005 April and from 2005 May to 2011 September. According to theGranger causality test, structural vector autoregressive model ( SVAR ), the impulseresponse analysis and variance decomposition, it is found that monetary policy onthe stock market have a certain influence in long-term and the impact of before thereform of non-tradable shares is greater than after reform of non-tradable shares.This shows that the Chinese stock market policy factors have a certain degree ofweakening. The impact of policy market is gradually reduced and the ability toregulate the market has been further strengthened. On this basis, this paper gives therelevant policy recommendations to the monetary authorities and investors.