Research On The Credit Channel Of Monetary Policy In China

Monetary policy is one of the key macro-control policys and the effectiveness of monetary policy has become the focus of public attention. Whether the central bank can use monetary policy tools to control specific economic parameters and act on the real economy finally or not, that depends on how fluent the monetary policy transmission channels are. Since the late 1990's, the macro-control pattern of China switches from direct to indirect control pattern. However, the reform of financial system lags behind, interest rate transmission mechanism is far from perfect and the traditional credit channel is obstructed to some extent. This is a significant cause of unsatisfactory effect of monetary policy for the past few years. At the present time, the central bank is prudent to raise interest rate, and pay more attention to structure and quantity and rhythm of credit supply. Bank credit management is still effective way for government to control the real economy. Then, how to play the function of credit channel in the monetary policy transmission process? The answers to these questions could provide the references for us to choose and arrange the future policies. In light of this, this dissertation looks for the strategies to optimize monetary policy operation and improve the effectiveness of monetary policy, by analyzing the transimission mechanism and specific pathway and problems of credit channel in China.The key contents of this paper can come down to five aspects as follows:Firstly, combining credit rationing theory and credit view with information economics, the dissertation introduces and reviews relative theoretic and empirical documents about the credit channel. Based on summarizing the theoretic premises of the existence of credit channels, this paper demonstrates that the economic and financial condition can basically meet the requirements for credit channels to conduct monetary policy in China from tree aspects as follows:Advantages of indirect financing, weak substitutability of assets and liabilities of financial institutions, credit rationing.Secondly, the dissertation studies empirically the importance and dynamic features of credit channel in China. The results indicate that credit channels play a crucial role in the monetary policy transmission process. From the perspective of the fluctuation features and the correlation between credit cycle and economic cycle, credit is an important factor to promote economic fluctuations in China. The result of comparative analysis of the significance between money channel and credit channel shows that at the present stage credit channel is the important channel of monetary policy transmission of China. The central bank controls real economy through bank credit management. In the case of the correlation with the ultimate aim, monetary supply and credit scale are both suitable to act as intermediate targets of monetary policy. Utilizing the state space model, the dissertation studies the weakening trend of the transmission effect of monetary policy through credit channel, and then analyzes the main influential factors.Thirdly, the bank lending channel of monetary transmission of China is researched. By studying the asset portfolio adjustment behaviors of different commercial banks, the empirical results indicate that the central bank policy can affect loanable fund and credit expansion substantially. Comparing with large state-owned banks, the small and medium-sized banks respond more sensitively to the impact of monetary policy. Next, in the text, an intertemporal equilibrium model is used to describe the product effect of the expansion mechanism of commercial banks' credit. The conclusion of empirical test shows that unsatisfactory effect of monetary policy may attribute to the different commercial bank credit behaviors in boom and recession time. Chinese commercial banks mostly are state-owned to a certain extent, and their credit decision usually has preference to property and scale of enterprises. Comparing with large state-owned enterprises, non-state-owned enterprises and SMEs undergo more serious credit rationing once credit markets tighten. Finally, the function of bank capital regulation to amplify credit channels has been analyzed by building a mathematical model about the money and credit expansion. The function of bank capital regulation to constraint commercial bank credit behaviors in China has strengthened gradually since 2004.Fourthly, balance-sheet effects of monetary policy transmission are researched on both firms and households levels. First, this paper reviews the relative theories and literatures about the relationship between investment and financing of enterprises. The empirical analysis shows that there is significant positive relationship between loans and new investment of Chinese enterprises. Second, a theoretical model is established to analyze the relations among monetary policy shock, enterprise's balance sheet features and credit availability. The dissertation uses the covariance model and financial database of the companies in Shanghai and Shenzhen stock markets, and tests the balance-sheet effects of enterprises. The empirical result shows that firms with small scale, low collateral value, low profitability and poor internal financing capability are more reliant on bank loans, and their credit availability are more significantly affected by monetary policy. Third, this paper empirically analyses the primary influence factors of consumer behavior and balance sheet effect in household level in the housing market. The conclusions are reached as follows:At present, revenue is the critical factor to determine the resident consumption level in China, at the same time, uncertainty and liquidity constraints are also important influence factors of consumer spending. Although monetary policy can regulate real estate price in China, the increase of housing wealth still can't drive dramatically household consumption. So, household balance-sheet effect is not significant.Finally, based on a summary of the conclusions of the chapters above, some policy proposals are given as follows:In the short term, the central bank should take full advantage of credit channel, but in the long term, the interest rate transmission mechanism should be established as the key channel of the monetary policy thansmission. To encourage the commercial hank give more credit support to small and medium enterprises, and increase the available supply of credit. Strive to develop consumer credit, and construct a new path for monetary policy to control the consumption of the residents. To deepen reform the economic and financial systems, clear the channels of monetary transmission.