Financial Markets And Monetary Policy Under A Dynamic General Equilibrium Perspective

China’s macroeconomic is of growth,at the same time, also in huge economic fluctuation. Either the growth rate or inflation rate has unusual fluctuation range. Faced with such large fluctuations, The People’s Bank of China detects itself to maintain stable growth, fluctuating the varieties. However, China’s economic structure transformation occurred in large reality, makes the transmission mechanism of monetary policy may have also undergone major changes, especially in the financial market becomes more and more prosperous, make people’s expected to the macro monetary policy can more and more fast be displayed in the entity economy. If the monetary transmission mechanism of traditional has no dominant position, then how much effects the financial market in monetary policy transmission? This is the subject of this paper.This paper builds a dynamic stochastic general equilibrium model to discuss the real effect of monetary policy, via the role of outstanding financial market. Using Bayesian estimation, we find how monetary policy will effect the real economy and the financial market in the next period. The main method is:using the prior distribution to estimate the model, using Calman filter algorithm estimating implementation model in all the values of exogenous variables, then put values back to the simulated model, so we found the effect of each shock individually.Through the above analysis, we draw a conclusion:first, the financial market plays a very important role in our country’s monetary policy conduction. Second, the phenomenon of inflation due to the emergence of credit made the financial market financing product prices overshoot phenomenon.