The Structural Effects Of China’s Monetary Policy On Industries And It’s Mechanism

As an important tool of macroeconomic control, monetary policy not only has a significant influence on the economy, but also has an important role on industrial development and its structural adjustment. When face the same monetary policy shocks, every industry has different responses to monetary policy, because of the differences in industrial property, production and management, financing features, so these will affect the industrial development and structural adjustment. Therefore, studying the effect of the monetary policy should not be confined to its overall impact on economic variables, but also be extended to the industrial development and structural adjustment.With the continuous improvement of our monetary policy framework, the ability of PBOC using various monetary policy tools to implement monetary policy also increasingly improves. But its’ influence on each industry is not homogeneous. This paper mainly studies if there exist the structural influence of China’s monetary policy on industry growth, in order to explore the effect of monetary policy on the adjustment of industrial structure. Through theoretical and empirical analysis, this paper find that there exist influence of impact China’s monetary policy, not only between the three industry but also the sectors within the industry, and on this basis this paper further explore the mechanism.At present, in the rapid growth of China’s economy, there also have the problems of unreasonable economic structure and unbalanced industrial development. Monetary policy should not be only confined to the traditional control of the total demand, but also be extended to promote the balanced industry development.This paper firstly reviews the theoretical development of the transmission mechanism of monetary policy, and reviews the empirical literature on monetary policy transmission in China. On these bases, this paper sums up the papers about monetary policy and industry development.Along the transmission channel of monetary policy, this paper analyzes the theory of industrial structural effects of monetary policy, and studies the different attributes and characteristics of industry will make the conduct of monetary policy to the industry effect existence difference. These lay the theoretical foundation for the empirical analysis in this paper.In the empirical analysis, this paper use panel data model to compare the effects of monetary policy on the three industries and its internal sectors’ output growth, based on the micro data of listing Corporation. Through the empirical analysis, this paper concludes that China’s monetary policy has the greatest impact on the second industry, the third industry secondly, while no significant influence on the first industry. The increase of money supply in China, promoted the rapid development of the second and the third industry, but to some extent more conducive to the development of the second industry. At the same time, there also exists structural effect of China’s monetary policy on the sectors within second and third industry. Within the second industry, influence of monetary policy on capital intensive industry is the biggest; technology intensive industry next, finally is labor intensive industries. From an overall perspective, the impact of monetary policy on technology intensive industry is in the middle position of relative advantage. Within the third industry, the impact of monetary policy on the producer services is bigger than the consumer services. In order to deeply understand the structural effects of monetary policy on industry, this paper divide the monetary policy since 2003 into relatively loose period and relative austerity period, and compare the effect of monetary policy on industry between these two periods. The empirical result is the monetary policy in relative austerity period is more conducive to the development of technology intensive and producer services industries.After theoretical and empirical analysis, in order to clarify how monetary policy form the structural impact on industry, this paper study the mechanism through the scale of debt financing, the cost of debt financing and the scale of equity financing. In the scale of debt financing mechanism, this paper firstly examines whether monetary policy will lead to the change in the scale of debt financing, and further investigate on the effects of debt financing scale changes on the development of the industry. This study shows that, the influence of monetary policy on each industry and its internal sectors through debt financing scale is different. So the scale of debt financing is one of the mechanisms of monetary policy’s structural influence on industry. Following this thinking, this paper find that the cost of debt financing and the scale of equity financing are also monetary policy’s structural influences on the industry.Last, this paper give some policy suggestion on considering the structural impact of monetary policy, deepening banking system structural reform, actively promoting the development of capital market, interest rate liberalization and other related policies.