An Empirical Study Of Monetary Policy Impact On Chinese Stock Market

In recent20years, China’s stock market had experienced a rapid growth, which was tough but remarkable. According to the international historical experience, the trend of a country’s stock market can basically reflect the actual operation of its macroeconomic. Therefore, the stock market was used as a symbol of the operation of the real economy. Facing the impact of financial crisis and European debt crisis on China’s economy, the central bank had used the monetary policy as a tool to adjust the macroeconomic of China. Since Jan.16,2008, the central bank has adjusted the statutory deposit reserve ratio23times. In terms of the frequency or intensity of the monetary policy, the monetary policy measures taken by the central bank in recent period are unprecedented in history.The paper combined the performance of the China’s stock market with the adjustment of the statutory deposit reserve ratio. First, the paper summarized the related theories of monetary policy, as well as the hot research points and development limitations in the field of monetary policy transmission mechanism. Then, the paper adopted the event study to do an empirical test of monetary policy influence on the stock market in China, especially on the Shanghai Composite Index, the financial sector and the real estate sector. The empirical test analyzed all of the Chinese A-stock data from June,2006to December,2011. And the adjustment of the statutory deposit reserve ratio served as a monetary policy tool. The paper gives the conclusion that the adjustment of the statutory deposit reserve ratio had a significant impact on China’s stock price, the financial sector and the real estate index.