Can The Monetary Policy Control The Stock Market Bubble?
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From the very beginning, this article demonstrates the theory of the structure of stock price, and then divide the stock price into several parts to analyze the reaction on the impact of monetary policy and make an exploration on the reasons of its fluctuation. As to the empirical part, we establish the TVP-VAR model to analyze the volatility of the relevant variables and the stock price under the influence of the monetary policy by using the quarterly data from 2002 to 2017. The results show that the impact of monetary policy on stock price has time-varying characteristic and structural changes, and the impact depends on the extent to which the bubbles offset the intrinsic value under the policy. When there are bubbles in the stock market, the impact of the tight-money policy will bring about the appreciation of stock price, which is not consistent with the traditional view. In conclusion, we analyzed the reasons of the above phenomenon by combining with the actual circumstances in China and put forward the relevant suggestions.
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