Re Inspection Of Dependent Relationship Between Monetary Policy And Stock Price Of China

In recent years, the development speed of the stock market is very rapid. As the intermediary of the monetary policy transmission mechanism, the fluctuation of stock price has caused some influence on monetary policy. At the same time, the adjustment of monetary policy will also have a effect on stock price through a certain transmission channel. Based on the current economic situation in China and with the adjustment of economic structure and the increase of stock market value, the dependence relationship between monetary policy and the stock price of dependency relation has been widely valued by the experts. In this paper, we study the interaction between stock price and monetary policy and the ways in which one acts on the other and the use of dates on the relationship between the goals of China’s monetary policy and stock price do a foundational analysis. This article is based on the following research context:Firstly, this paper introduces the traditional theory of monetary policy from theory angle, including the explaining targets of the base money, interest rate, excess reserves operations and so on. In each period the choice of intermediate target in China as well as the intermediate target selection of the comparative analysis with other countries, and the ultimate goal of conflict from three aspects. Secondly, this paper introduces the relevant theories of stock price and stock price fluctuations caused by various factors. Again, from the positive and negative two aspects elaborated the monetary policy and stock price of interdependent mechanism, including stock price fluctuation on monetary policy transmission mechanism, the influence of the impact on monetary policy intermediate goals and the ultimate goal, and target to adjust monetary policy impact on stock prices. In comprehensive target of monetary policy in China, and data availability, using VAR model to do empirical analysis, with the Shanghai composite index closing price as the representation of the stock price, and with the broad money supply and seven days interbank lending rates, as a representation of the intermediate target of monetary policy to the CPI, GDP, as a representative of the final goal of monetary policy, selecting data in 1998-2015, all variables of the quarterly data, and analysising of the dependence of stock price and monetary policy goals. Conclusions are as these: through the co integration test, we found that Chinese stock price index,and inflation rate, money supply, macro economic growth and interest rates have long-term co integration relation. Through the Granger causality test, found that under the 5% confidence level, the stock price and monetary policy objectives have the following relationships: the Shanghai index fluctuation is the ultimate Granger cause of monetary policy rate of inflation and economic growth. On the contrary, the ultimate goal for monetary policy is not granger cause of stock price fluctuations. Stock prices and monetary policy intermediate target has the following relationships: the increase of money supply and stock price fluctuations are granger causality, the interest rate is not the granger cause of stock price fluctuations, but the stock price fluctuation is the granger cause of interest rates. According to the above conclusions, the paper puts forward corresponding policy recommendations for China’s monetary policy implementation: the central bank in monetary policy should pay proper attention to asset price volatility while taking monetary policy. At the same time, China should gradually improve the monetary policy framework and promote the development of stock market along with monetary market order.