A Study on the Relationship between Monetary Policy Variables and Stock Market

Song Li

International Journal of Business and Management, 2017, vol. 13, issue 1, 218

Abstract: Through the analysis of monetary policy variables and stock market from January 2010 to December 2015, including money supply M1, M2,one-year Benchmark lending rate for financial institutions，interbank offered rate, and the stock market price index data, through correlation analysis, unit root test, co-integration test, Granger causality test and VAR model test, empirical test results show that there is a two-way causal relationship between money supply M1 and stock market , M2 and stock market have a one-way causal relationship from M2 to stock market. One-year benchmark lending rate for financial institutions and stock market have a one-way causal relationship from stock market to one-year benchmark lending rate for financial institutions. The interbank offered rate and the stock market have a one-way causal relationship from the stock market to the interbank offered rate. China's transmission channels between monetary policy and stock market exist, but is not sound and there is a delay. When using the monetary policy variable to adjust the stock market, the money supply policy is more useful than adjusting the interest rate.

Date: 2017
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