The effect of monetary policy on raising funds in the stock market: Empirical analysis based on VAR model

Monetary policy has an important influence on raising money in the stock market. Based on the monthly data of narrow money supply M1, broad money supply M2, inter-bank offered rate and the amount of funds raised in Shanghai and Shenzhen stock markets from January 2010 to December 2019, this paper establishes a vector autoregression (VAR) model to empirically analyze the impact of monetary policy on the funds raised in the stock market. The empirical results show that money supply M1 and M2 as well as inter-bank offered rate have a certain impact on the capital raised in the stock market. The amount of funds raised in the stock market changes in the same direction with M1, and changes in the opposite direction with M2 and interbank offered rate. M1 has a more obvious influence on the amount of funds raised in the stock market, while the influence of interbank offered rate lasts longer.