Study and empirical analysis on influence of monetary policy on stock market price in China based on Golden model

Abstract

This paper, based on Golden growth model and using Stata10.1 software, makes a co-integration analysis and linear regression to monthly indexes and stock market price indexes of monetary policy in China from January 2008 to March 2013, adopts Granger test and also establishes impulse response function. The study shows that: in China, relevant monetary policy indexes lack interpretability to the price fluctuation in stock market. Therefore, in China, when monetary policy is made, its transmission mechanism to stock market should be cleared. As there is a notable positive correlation between the integration degree of capital market and monetary market, and the sensation to the monetary policy as well as the validity of monetary market, the establishment of a stable legal capital circulation channel between the monetary market and capital market can not only benefit the joint development of monetary market and capital market but also improve the effectiveness of monetary policy.