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As the development of financial freedom, especially rapid development of stock market affect the effect of monetary police. More scholars to study the relationship between stock market and monetary policy, The key point is whether put the stock price into the monetary policy target. With the fast development of stock market in China, stock price volatility to attract a lot of money out of the capital market funds, reducing the stability of money demand, Affect the policy implementation of central bank. The implement of money policy also can affect the stock price. So research the relevance between stock market and money policy, monetary policy transmission channels to clear the stock market have become the new topic in our nation. The article is on the base of theoretical research results at home and abroad, combining with the economic reality in China, using the theoretical analysis and empirical analysis to explore the relationship between stock price and monetary police. Through empirical results, propose meaningful policy recommendations for the relevant decision-making department.At first, this paper discuss the current research in this filed, on this basis, stand in the point of our current economy, research how the stock price affect money demand, intermediary aim of money policy, and conduct channel of monetary policy. Also on the contrary, we discuss through taking of monetary policy, whether the stock price will change.On the foundation of researching in theory, this paper set up VAR model, Johansen Coin-tegration test, Granger Causality Tests, Impulses response function, Variance decomposition, Use these latest quantitative methods to analyze interaction between monetary policy and stock market. Derived from the analysis, stock price volatility on the money supply has more effect, while due to the imperfections of the stock market as well as our stock price volatility caused by many factors, monetary policy has lower contribution on stock volatility.Finally, based on the test results, presenting the stock market development, the central bank should be concerned about not "peg" stock price fluctuations; establishment of forward-looking monetary policy to reduces the impact of price fluctuations on the economy; clearing monetary policy transmission in the stock market, these series of policy recommendations have reference value for effectiveness of monetary policy.
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