Study on the Effect of China's Interest Rate Policies on the Return of Stock Market

Abstract

Analyzing the impact of the interest rate policies performed by the China's central bank on the rate of return of China's stock market, this paper intends to test the effectiveness of the monetary policies. Based on the method of event study and nonparametric test, 24 events of interest rate adjustment from 1993 to 2014 are studied. The results demonstrate that the interest rate policies have no systematic and significant effect on the return rate of China's stock market, which also indicate that the mechanism of how monetary policy and the stock market affect each other is not perfect.