Research On Impact Paths Of Interest Rate Adjustment On Stock Market

Along with the deepening of China's economic reform,People's Bank of China is gradually transforming the monetary policy of the intermediate target from the money supply to interest rates.Since April 2005 to May 2016,our country has experienced 25 times interest rate adjustment.In July 2013,financial institution loans were liberalized.China is pushing forward the market-oriented reforms of interest rates at present,which means that China's interest rates could be dynamically changed with the market supply of funds.The interest rate adjustment not only affects the change in money supply,but also the capital return,the financial situation of enterprises and so on.At the same time,the interest rate adjustment has the certain influence to the stock market.It is of much academic significance and realistic importance to study how interest rate adjustment affects the stock market,direct effect or indirect effect by affecting investor sentiment? Aiming to analyze the impact path of interest rate adjustment on stock market,this paper uses the mediation models based on the relevant data from April 2005 to May 2016.The results show that investor sentiment has a mediating effect on the impact of stock market from interest rate adjustment,especially in the energy industry.Moreover,on the basis of the Smoot Transition Regression(STR)model,this paper analyzes the impact path in various level of interest rate.The results show that(1)in normal state of interest rate,interest rate adjustment affects stock market through the mediate effect path of investor sentiment;(2)in the high state of interest rate,the stock market is affected by direct effect from interest rate adjustment,which is with indirect effect compose the impact paths of interest rate adjustment on stock market.This fully demonstrates that investor sentiment plays an important role in the effect of interest rate adjustment on the stock market.And when the government adjusts interest rate to affect the stock market,they should give more attention to investor sentiment.Finally,through further analysis of the conclusions,three policy recommendations are proposed.First,the central bank should take into account the investor sentiment in the adjustment of interest rates.The central bank needs to pay more attention to the analysis of the market and consumer psychology and the guidance of the community expectations.Second,the emphasis point of the central bank could be different according to the level of interest rates.In the general condition of interest rates,the central bank should mainly focus on the moderating effect of the investor sentiment between interest rates and stock market through.And in the case of high interest rates,it is necessary for the central bank to focus not only on the impact path through the investor sentiment,but also its direct impact of interest rates on the stock market.Third,China should strengthen the education of investors to improve the effectiveness of interest rate policy.