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Essay代写:The impact of monetary policy on the stock market

2018-10-08 | 来源:51due教员组 | 类别:Essay代写范文

本篇essay代写- The impact of monetary policy on the stock market讨论了货币政策对股市的影响。利率对股票价格的影响一般比较明显,反应也比较迅速。要把握住股票价格的走势,首先要对利率的变化趋势进行全面掌握。率政策本身是中央银行货币政策的一个组成内容,但利率的变动同时也受到其他货币政策因素的影响。利率与股价运动呈反向变化是一般情况,不能将此绝对化,股价和利率并不是呈现绝对的负相关关系。本篇essay代写51due代写平台整理,供大家参考阅读。

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The central bank adjusts the benchmark interest rate high and low, has the influence to the stock price. In general, when interest rates go down, stock prices go up; When interest rates go up, stock prices go down. The reason is: interest rate is an important basis to calculate the value of stock investment. When the interest rate goes up, the intrinsic investment value of the same stock goes down, thus causing the stock price to go down. Conversely, share prices rise. The change of interest rate level directly affects the company's financing cost, thus affecting the stock price. Low interest rate can reduce the interest burden of the company, increase the company's earnings, and the stock price will rise accordingly; Instead, interest rates go up and stock prices go down. As interest rates fall, some investors will switch from saving to investing in stocks, boosting demand and driving up share prices. Conversely, if interest rates rise, some of the money will be diverted from the stockmarket to bank deposits, causing share prices to fall.

The effect of interest rate on stock price is obvious and the reaction is quick. Want to hold the trend of stock price, want to have overall control to the change trend of interest rate above all. It is necessary to point out that interest rate policy itself is a component of the central bank's monetary policy, but the change of interest rate is also affected by other monetary policy factors. If the money supply increases, the discount rate of the central bank decreases, and the required bank reserve requirement ratio decreases, it indicates that the central bank is easing monetary policy, and the interest rate will decrease. On the contrary, the general trend of interest rate is rising. The reverse change of the above interest rate and the movement of stock price is the general situation, which cannot be absolute.

From 1996 to 2002, in order to boost domestic demand and stimulate consumption and investment, the people's bank of China lowered the interest rate of RMB deposits and loans for eight consecutive times. On May 1, 1996, the central bank cut interest rates for the first time. On August 23, 1996, the central bank cut interest rates for the second time, lowering the average deposit rate by 1.5 percentage points and lending rate by 1.2 percentage points. Affected by the news, the index hit an all-time high at the end of the year. On October 23, 1997, the central bank cut the interest rate of deposit and loan by an average of 1.1 percentage points and 1.5 percentage points respectively. On March 25 and July 1, 1998, the central bank cut interest rates again. Although the magnitude of the reduction, but the interest rate on the reserve significantly reduced. On December 7, 1998, the central bank cut interest rates for the sixth time. But after the three rate cuts, stock indexes fell. On June 10, 1999, the central bank announced the seventh rate cut. The average deposit rate of financial institutions decreased by 1 percentage point, and the average lending rate decreased by 0.75 percentage points. Since February 21, 2002, the people's bank of China announced to reduce the interest rate of RMB deposits and loans for the eighth time, Shanghai and shenzhen stock indexes also rose on the first day after the announcement.

When times are good and stock prices soar, interest rate adjustments do not exert much control over share prices. Similarly, when the stock market is in a slump, even if there is an adjustment policy of lower interest rates, it is likely to make the stock price rebound sluggish. In the United States, interest rates and stock prices rose at the same time in 1978. There were two reasons for this anomaly. First, many financial institutions had no confidence in the U.S. government's ability to maintain the status of the dollar in the world and control inflation. Second, the stock price had already fallen to a very low point, far away from the actual price of the stock, so a large amount of foreign capital flowed to the U.S. stock market, causing the stock price to rise. The same was true in Hong Kong in 1981.

Interest rate as the price of funds has a great influence on investors' choice of investment instruments. Interest rates are constantly changing, and interest rate adjustments can affect investors' willingness to invest in the stock market. Specifically, higher interest rate will restrain investors' willingness to invest in stocks and reduce the amount of capital that investors can get into the stock market. Lowering interest rates will increase investors' willingness to invest in stocks and increase investors' access to the stock market.

When the government favors looser monetary policy, the central bank buys a lot of valuable stocks, which increases the money supply in the market. That would push down interest rates and the cost of capital, which would drive up investment and consumption enthusiasm, production expansion and profits, which would drive up stock prices. Instead, stock prices will fall.

Adjust the influence of money supply on the stock market. The central bank can regulate the money supply through the reserve ratio and rediscount policies, thereby affecting the money supply and demand in the money market and capital market, and thereby affecting the stock market. If the central bank raises the reserve requirement ratio, which largely limits the commercial banking system's ability to create derivative deposits, it freezes some of the excess reserves of commercial Banks. The stock market price tends to decline because the reserve requirement ratio corresponds to a large amount of deposits and the money multiplier can reduce the money supply to a greater extent. Similarly, if the central bank increases the rediscount rate and strictly examines the rediscount qualification, the capital cost of commercial Banks increases, the market discount rate rises, the social credit shrinks, and the capital supply of the stock market decreases, making the stock market trend soft. Conversely, if the central bank lowers the reserve requirement ratio or the rediscount rate, it usually leads to a rise in the stock market.

The effect of exchange rate on the stock market is manifold. Generally speaking, the more open a country's economy is, the more internationalization the stock market is, and the greater the impact of the stock market on the exchange rate. Here the exchange rate is expressed in terms of the local currency per unit of foreign currency.

Generally speaking, the exchange rate rises, the local currency depreciates, the domestic product competitiveness is strong, the export-oriented enterprise will increase the yield, thus the enterprise's stock and the bond price will rise; Instead, the cost to companies dependent on imports rises, profits suffer and stock and bond prices fall. At the same time, the rising exchange rate and the devaluation of the local currency will lead to the capital outflow from the country. The capital outflow will reduce the demand of the domestic stock market and thus the market price will fall.

In addition, when the exchange rate rises, the price of imported goods represented by the local currency increases, which in turn drives up the domestic price level and causes inflation. The impact of inflation on the stock market should be analyzed according to the economic situation, specific enterprises and policy behavior at that time. In order to maintain the stability of exchange rate, the government may use foreign exchange reserves to sell foreign exchange, which will reduce the supply of local currency and cause the stock market price to fall until the exchange rate falls back to the equilibrium. Negative effect may cause the stock price to rise. If the government USES the bond and currency markets to control the rise of the exchange rate without reducing the money supply, that is, selling foreign exchange while buying back government bonds, the government bond market price will rise.

As China's RMB is subject to free convertibility under trade and strict control of capital account, the official RMB exchange rate is not vulnerable to the impact of international financial market. However, due to the free convertibility under trade terms, the psychological panic formed the exchange rate expectation, and the "black market" trading of RMB became active, resulting in the fluctuations of real exchange rate, thus affecting the stock market.

At the same time, although the RMB exchange rate remains stable, due to the turbulence in the international financial market and the differences in economic development and monetary policies of different economic communities, the appreciation trend of RMB exchange rate against these currencies will also affect the Chinese stock market.

The international financial market turmoil has increased the difficulty of the implementation of China's macroeconomic growth target, thus indirectly affecting the development of China's stock market in the macro and policy aspects.

Since China's reform and opening up, greatly improve the external dependency of the national economy in our country, the international financial market turmoil to cause a decline in export growth, foreign direct investment decline, thus affecting economic growth, the unemployment rate rose, the deterioration of the macroeconomic environment led to the decrease of the performance of listed companies and investors confidence drops, eventually make the stock market decline. Among them, the turbulence of international financial market has the greatest impact on the performance of export-oriented listed companies and foreign trade listed companies, as well as the biggest impact on their share price.

At the same time, relevant government departments will draw lessons from the international financial market turmoil and take positive measures to reduce the risk of the stock market, strengthen supervision and improve the quality of listed companies, so as to promote the stable development of the stock market.

From the current market structure of China, the impact of international financial turmoil on the a-share market is relatively small, or it can be ignored when analyzing the operating trend of a-share market. But for the B - share market with foreign investors as the main investor, the impact is relatively big. Therefore, in the analysis of the B share market, this is an essential factor that must be paid great attention to. Since investors in the b-share market include foreign investors, the turbulence in the international financial market will inevitably affect the b-share market in China through affecting the investment behavior of foreign investors. If foreign investors adjust their original investment portfolio, change investment direction, cash out, and other changes in investment behavior, it will affect the b-share market.

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