Research On The Effect Of Credit Channel Of Monetary Policy Under The Supply-side Reform

hThe issue of credit transmission channel of monetary policy and its effectiveness has always been the focus of monetary authorities and academic circles around the world.China has proposed a supply-side reform of “cutting overcapacity,reducing excess inventory,deleveraging,lowering costs,and strengthening areas of weakness” in the context of the new economic normal,which has had a major impact on the monetary policy regulation,making the credit transmission channel of monetary policy more complicated.Therefore,a more systematic and forward-looking research on credit channel under the background of supply-side reform can be more effectively improve the effectiveness of China’s monetary policy and provide a suitable monetary and financial environment for supply-side reform,and achieve medium-term and long-term strategic objectives of structure adjustment,promoting transformation and seeking balance of regional development.From the history of China’s economic development and monetary operation,the characteristics of bank-oriented financial institutions determine the basic position of credit channel in the monetary policy transmission.China has experienced a transition from a planned economy to a market economy,and credit channel of monetary policy has been playing an important role in various historical periods.Judging from the current economic development situation,the internal and external environment faced by the credit transmission channel of monetary policy is complicated,and the supply-side reform on economy has produced new regulatory demands for the quantitative easing monetary policy that has been implemented for many years.China’s traditional macro-control is mainly on the demand side in the face of economic slowdown,but long-term overuse brings side effects such as production factors misallocation,diminishing return on investment,and overcapacity.Therefore,the supply-side reform is an inherent requirement for realizing the rebalancing of supply and demand structure.In order to effectively promote the supply-side reform and dredge the transmission channel of monetary policy to the real economy,People’s Bank of China has been actively exploring a new monetary policy operation mechanism under the new economic normal in recent years.However,many problems are still in the current credit transmission channel of monetary policy.Credit flows deviate from the real economy and monetary policy fail to play role in the supply-side reform.Finance is the core of the development of modern economic.The effectiveness of supply-side reform depends on whether monetary policy can provide it with a suitable financial environment.Therefore,explore the effectiveness of monetary policy transmission is of great significance to deal with the current structural contradiction between supply and demand.This paper attempts to conduct a more comprehensive and detailed study on the effectiveness and structural effect of credit transmission channel of China’s monetary policy under the background of supply-side reform.It is divided into seven parts.The details are as follows.The first part is the introduction,which mainly expounds the research background and significance,research approach and methods,the possible innovations and shortcomings of this paper,and the literatures are reviewed.The first chapter is theoretical analysis for the credit channel of monetary policy and its effect.Firstly,theory of credit channel of monetary policy and structure effect of monetary policy are summarized,and then this chapter turns to the factors that influence credit channel in three aspects,including transmission process,financial market development and transmission subject behavior.Theories mentioned above provide this paper with theoretical support.Starting from the transmission channel of monetary policy,the theory of credit transmission channel based on information asymmetry and financial friction are summarized,which provide a theoretical analysis framework for identifying the effectiveness of credit channel of China’s monetary policy in the third chapter.Begin with the structural effect of monetary policy,the connotation of the structural effect of monetary policy is also analyzed.Based on this,the financial accelerator theory and the optimal currency area theory are summarized,which provide research framework for exploring effectiveness of credit channel of China’s monetary policy in industrial restructuring and regional economic adjustment.The second chapter analyzes supply-side reform and its impact on credit channel.Firstly,the history of China’s monetary policy is reviewed.Secondly,industrial structure effect and regional effect of China’s monetary policy,and the important role of credit channel in the transmission of China’s monetary policy are analyzed.The operational characteristics of monetary policy in each historical stage are also summarized.Based on this,this chapter discusses the mechanism of credit transmission channel of China’s monetary policy.At the same time,this chapter reviews the development history of China’s economy,interprets the background and significance for the supply-side reform proposed by the Chinese government.Combining with the new economic normal characteristics of China and the goals of supply-side reform,I further analyze the impact of supply-side reform on credit channel of China’s monetary policy and describe the adjustment of credit channel under the background of supply-side reform.The third chapter is empirical analysis for the effectiveness of credit channel in the transmission of China’s monetary policy.Starting from the macro perspective,new changes in the credit transmission channel of monetary policy in the context of supply-side reform are analyzed,and then I emphasize the structural monetary policy tools that China has frequently adopted in recent years and its implementation effects.The sample period is 1998-2017.I choose monthly financial institution loan balance growth rate(CR)as the proxy variable for the credit channel and the broad money M2 as a proxy variable for monetary policy respectively,and establish VAR model.The relationship between money and credit,credit and output,credit and inflation are examined respectively in two stages by using Granger causality test,impulse response and variance decomposition.On the one hand,this chapter examines the effect of the first phase of the credit channel which transmits from the monetary policy to the financial institution(from the central bank to the commercial bank).On the other hand,this chapter examines the effectiveness of credit channel of the monetary policy through the second phase of the credit channel which transmits from financial institution to the GDP/CPI(from commercial bank to the real economy).The fourth chapter is empirical analysis for the effectiveness of credit channel in industrial structure adjustment.Starting from the micro-perspective overcapacity industry and non-capacity industry,this chapter makes use of the theory of overcapacity to analyze the motivation of overcapacity in China and the financing structure of overcapacity industry.I find that the main reasons for China’s overcapacity are imbalance of economic structure,market failure and government failure.This chapter uses the micro-level data of 2663 A-share listed companies from 2001 to 2017,financial institution loan balance(CR)reflects China’s credit transmission channel,and the asset-liability ratio,current liabilities ratio,financial liability ratio,and credit resource allocation are used in turn to analyze corporate financing structure.This chapter establishes a panel regression model of fixed effects to explore the effectiveness of China’s credit channels in industrial restructuring.Further this chapter examines the impact of credit channel on the financing structure of listed companies in the overcapacity industry.The empirical results show that increase in the growth rate of financial institution loan balance reduces the leverage ratio and financial debt ratio of firms in overcapacity industry.Credit channel has effectively reduced the leverage ratio of overcapacity industry in the industrial structure adjustment,but loans in overcapacity industry are still increase in credit easing years.The fifth chapter is empirical analysis for the effectiveness of credit channel in regional economic adjustment.Firstly,regional effect of China’s monetary policy and factors that influence credit transmission channel of China’s monetary policy are analyzed.According to the economic and financial development position of different regions,China is divided into four major economic regions——eastern,northeast,central and western economic region.Based on the theory of optimal currency area,this chapter analyzes regional differences and their cause mainly in the following aspects such as production factors freely flow,economic openness,industry diversification,financial integration and so on.On this basis,spatial econometric model is used to examine whether there is spatial correlation in the transmission process of credit channel,that is,the interrelationship between the implementation effects of monetary policy transmission in different regions of China,so as to examine the effectiveness of credit channel in regional economic adjustment.This chapter is divided into three steps to test whether credit channel has regional effects.Firstly,fixed effect of panel model is examined nationwide,which is as the benchmark of the regression of the spatial econometric model.Secondly,spatial panel econometric model,including spatial Durbin model(SDM),spatial autoregressive model(SAR)and spatial error model(SEM),are used to examine the regional effects of credit channel of China’s monetary policy in the whole country.Thirdly,this chapter uses spatial econometric model to analyze regional effects of credit transmission channel in China’s four major economic regions.The empirical results show that credit channel has spatial effects in the whole country and in four economic regions.However,mode of action and effect in the four major economic regions are slightly different,which mainly depend on the economic development,industrial development and resource endowment position of four economic regions.In the seventh part,conclusions of this paper are summarized and several policy recommendations are proposed.Based on the conclusions,I refine the core viewpoint of this paper.I also make some corresponding thoughts on the implementation of monetary policy and financial reform under the supply-side reform.Finally,I propose policy recommendations on differential credit policy,optimization of credit structure,innovative monetary policy tools and other aspects.