The Empirical Analysis Of The Effect Of Monetary Policy To The Stock Price

Monetary policy is an important means of macroeconomic adjustment, and the stock market is a leading indicator of macroeconomic. How the relationship between monetary policy and the stock market will directly affect the implementation of the macroeconomic objectives. There have been some studies on monetary policy and stock prices, but most of them explore from the point of view of the money supply or interest rates. Today, our country frequently introduced for this particular stage, after the scientific analysis of monetary policy, these policies are bound to the stock price impact. However, China’s stock market compared to many developed countries is not perfect. The impacts of monetary policy for the stock market are not the same. Different policy measures and the stock market linkage role are different. Studying the impact of monetary policy on stock prices is significance for developing of monetary policy and the stock market.Analysis of the monetary transmission mechanism in theory, through a variety of measurement instruments, such as the ADF unit root test, Johansen cointegration test, Granger causality test, study the data which from reform of non-tradable shares to this moment. Empirical Analysis of the impact of monetary policy instruments on the Shanghai Composite Index and small and medium-sized boards.There are six chapters for this article:Chapter1Introduction. Introduce the full text of research background, significance, framework and content. Chapter2analyzed theoretically the monetary transmission mechanism. The main contents include:Mechanism of money supply, interest rate and so on changes on stock price. The empirical part is from chapter3to chapter5. And it is the focus of the full text. In the Chapter3, it is focus on how to changes on stock prices, when the deposit reserve rate changed. Empirical process, using monthly data from2005to 2011, the introduction of the industrial output value representing the economic fundamentals as control variables, respectively, an empirical analysis on the Shanghai Composite Index and the small board index, and compared with them. Chapter4says the interest rate changes on stock prices. In this part, it chooses the savings deposits of financial institutions on behalf of residents to be a control variable. And it analyzes the Shanghai Composite Index and the small board index. Chapter5is for open market operations on the stock price. This paper studies the central bank bills to the impact on the stock market, selecting the two of the representative central bank bills to empirical analysis. Chapter6is the concluding part of this article. On the basis of the results of previous studies, summarizes the impact of the three tools of monetary policy on stock prices. Finally, described the innovation and shortcomings of this paper.Through empirical analysis in this paper it is conclusions:(1)The long term, there is a negative correlation between monetary policy and the stock index. However, the relationship between open market operations and the stock index is not significant.(2)From the Granger test results, the stock index (the Shanghai Composite Index and the small board index) is the Granger cause of the deposit reserve rate and the interest rates. Open market operations and the Shanghai index does not exist Granger causality.(3) From the impulse response results, the three tools of monetary policy in the short term are negatively correlated to stock index, in which open market operations had no significant effect on stock prices.In this paper, it made the following innovations:First of all, empirical analysis using data from reform of non-tradable shares so far. This helps us to use the monetary policy on stock prices correctly. Secondly, empirical analysis of the impact of monetary policy instruments on the Shanghai Composite Index and the small board index, and on this basis, makes a comparison between them. This is important of the development of China’s stock market. Finally, it Selected direct monetary policy tools for quantitative research.But because of the capacity constraints, there are still some of the following defects:First of all, Statistical results have some defects, because of the statistical data which is limitations and empirical research is not comprehensive enough so that the results will cause a certain deviation. Secondly, the number of samples taken may be inadequate; it will cause some measurement error. Thirdly, in the part of open market operations, the central bank bill rate to be measured only, but in real life, treasury bonds and policy financial securities and so on are also open market operations. The effect on stock prices caused by them need for empirical analysis in the future. Finally, some of the important monetary policy do not involve in this paper.