| The history of modern monetary policy in China is very short. Although the academia and the functional department pay much attention to the validity of monetary policy, it is not certain on how to evaluate the validity of monetary policy. Only when we evaluate the validity of monetary policy correctly, we can analyze the reasons influencing the validity of monetary policy and put forward some pointed suggestions on enhancing the validity of monetary policy. It is the subject of this paper.Based on the sum-up of relevant theoretics and the current researches on the validity of monetary policy, this paper builds up the frame of evaluating the validity of monetary policy in China: Firstly, we should judge whether the money is neutral or not; then we analyze the aggregate effects of monetary policy on the macro economy and distinguish the effects into two parts which are output effect and time lag effect, the former can be expressed by dynamic monetary policy multiplier and the latter can be divided into outside and inside time lag effect; because of the dual economic structure in urban and rural areas and the imbalance of regional economic developments in China, this paper analyzes the differences between urban and rural effects of monetary policy as well as the differences among regional effects of monetary policy. The methods of sequence diagram, granger causality test, (structural) vector autoregression model, state space model and so on are used in this paper.The results of the research on the validity of monetary policy in China are as follows: Firstly, the research on the issue of the monetary neutrality shows that we shoulddistinguish the money levels and the variables of different frequencies when judging whether money is neutral or not. When we use monthly and quarterly data, three levels of money M0, M1 and M2 are all non-neutral. But when we use yearly data, only M1 is non-neutral, and when we use the lower frequency biennial data, M1 becomes neutral too. We can conclude from the results that the money tend to be non-neutral in short run but neutral in long run despite the money levels.Secondly, the research on the dynamic monetary policy multiplier in China shows that the monetary policy multiplier in China is unstable. From 1983 to 1990, the monetary policy multiplier increases gradually as a whole; but from 1990 to 2007, the monetary policy multiplier decreases gradually. Meanwhile, the monetary policy multiplier fluctuates separately in these two time segments.Thirdly, this paper distinguishes the outside and inside lags of monetary policy. As for the outside lag, the time lag of M0 on output is 3 quarters and its 4 quarters on price; the time lag of M1 on output is 2 quarters and its 4 quarters on price; the time lag of M2 on output is 7 quarters and its 6 quarters on price. Comparatively, the time lags of M1 are shorter, the time lags of M2 are longer and the time lags of M0 are middle. As for the inside lag, the typical cases in the monetary policy practices show that the inside lag of monetary policy is long, the decision-making department should improve the ability of judging the economic situation and the ability of making decisions.Lastly, the uniform monetary policy represented by M1 has different effects in urban and rural areas: the effect on the urban economy is stronger than on the rural economy; and the differences among regional effects of monetary policy are as follows: the effect on the east is the strongest, the middle is next, then the west, and the northeast is the weakest.Evaluating from the several aspects mentioned above, the validity of the monetary policy in China is not perfect.Then this paper analyzes the factors influencing the validity of monetary policy from the view of segments of monetary policy transmission as well as the view of differences in segments of monetary policy transmission between urban and rural areas and among regions.Firstly, as for the general factors influencing the transmission of monetary policy, we can know that the decision-making level of the Central Bank is not high; as for the commercial banks, the forms of merchant banking are single, the capability for product innovation is weak and there exist credit rationing; as for the state-owned enterprises, the corporate governance is not perfect, the property right reform lags and the functions of the government and enterprises mixed up, all of these problems make the investment efficiency of the state-owned enterprises very low and lead to soft budget constraint, most of non-state-owned enterprises are small and medium-sized, for the sake of their lower development, their financing demands are difficult to be satisfied; the Chinese denizens prefer low consumption and high saving because of the lower earning and the distempered social security; the financial market is not perfect. The factors mentioned above negatively affect the validity of the monetary policy.Secondly, through the analysis on the differences in economy and finance between urban and rural areas as well as among regions, we can know that there are obvious differences in economic factors such as industrial structure, enterprise structure, and residents'behavior and so on between urban and rural areas and among regions. Also there are obvious differences in financial factors such as financial scale, financial institution and financial market and so on between urban and rural areas and among regions. All of these differences cause the different monetary policy effects between urban and rural areas and among regions.Lastly, this paper conceives the suggestions on improving the validity of monetary policy in China. To enhance the validity of the monetary policy in China, we should perfect the segments of monetary policy transmission, enhance the effect of monetary policy on rural economy and strengthen the coordination of the regional effects of monetary policy. This requires us to take measures as follows:Improving the decision-making level of Central Bank; perfecting the reform of state-owned commercial banks, developing the small and medium-sized commercial banks and perfecting the construction of social credit system; optimizing state-owned economic layout; deepening the reform of state-owned enterprises and enhancing self competition of small and medium-sized enterprises; improving the income level of denizens; forcing the reforms in the fields of social security, medical service, housing and education and strengthening the modern financial consciousness of denizens; perfecting the construction of money and capital markets and increasing the integration of these two markets.Improving the earnings of rural residents; enhancing government support for rural economy; improving the structure of rural economy; developing rural finance. Promoting harmonious development of regional economy and finance; performing different monetary policies in different regions. |
