Study on Wealth Effect, Inflation Effect and Liquidity Effect of Stock Market based on LSTVAR Logic Smooth Transfer Process

Abstract

Considering the fact that the stock market has different influence on the real economy under different monetary policy cycles, this paper sets the monetary policy variable as a transfer variable and uses the LSTVAR model. By introducing a continuous transfer function, this paper examines the different effects of the monetary policy stock market on the real economy in LSTVAR logic smooth transfer process. This paper found that when currency growth changes, stock market variables have different and significant impacts on the real economy. Under the mechanism of low currency growth, the stock market has a stronger correlation with the real economy. The study found that China's stock market has a strong wealth effect, inflation effect and systemic liquidity effect. At the same time, China's stock market has a relatively high degree of maturity and it can better allocate currency. The stock market has an indicative role in the development of the national economy, and it has assumed its "barometer" function.