An Econometric Test on the Time Varying Effects of Monetary Policy on Stock Market Liquidity——An Empirical Analysis Based on TVP-VAR Model

Abstract

Abstract:

This paper firstly analyzes the transmission mechanism of monetary policy on stock market liquidity, and then selects illiquidity and turnover rate to represent the stock market liquidity. Thenit uses TVP-VAR model to analyze the dynamic impacts of monetary policies on stock market liquidity and investigates the time varying characteristic of the effect of monetary policies on stock market liquidity. The empirical results show that the expansion of monetary policy can increase stock market liquidity while the shrinkage of monetary policy leads to decrease. The effects of money supply, interest rates and market yields on China's stock market are significantly time varying. There are obvious differences of the effect of monetary policy on the stock market in the degree and the duration.

Key words: monetary policy, stock market liquidity, TVP-VAR model

Jin Chunyu, Zhang Haobo. An Econometric Test on the Time Varying Effects of Monetary Policy on Stock Market Liquidity——An Empirical Analysis Based on TVP-VAR Model[J]. , 2016, 28(3): 20-32.

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