On The Transmission Mechanism Of Monetary Policy During The Transformation Period In China

AbstractThe effectiveness of money policy of one country chiefly relies onthe transmission mechanism in the financial fields. Transmissionmechanism of money policy is function that method of money policyinfiuence intermediate targets and then the whole body of economy.China is confronted with the problem of insufficient effectiveness ofmoney policy. So, the researches on the transmission mechanism ofmoney policy are of meaningfu1 to theory and reality. Because manymethods of expanded money policy, such as reducing interest ratecontinuously in recent years, have failed to play its role, more experts ofChina have paid attention to this problem. Unfortunately, manyresearches are unsystematic unsuitable to guide the reality.This article on the basis of westem theories, takes system analysisand research on the intemal and external factors affecting transmissionmechanism for consideration, and analyses the function of credit rationchannel and interest rate charme1, as well as their development tendency,ending with some suggestion on how to improve transmissionmechanism.At first, the article put fOrth such idea that the performance ofmoney policy in China haven't yet been provided with conditionsrequired by traditional theories. The first pointt the selection of themethods of money po1icy and intermediate targets haven't yet embodythe function of the central bank to control finance indirectly by using themoney policy. The second f the development of main body in the processof transmission mechanism, such as financial market and institution isimmutual. Then, the research start with the analyses of credit rationingmechanism of interest rate mechanism which play the important role,and contribution the low effectiveness of transmission to the lankness of good social credit relationship. The articles, hereby, point out that we should expand credit channel with low risks and rebuilt social credit relationship through rediscount methods in short term; in long term, however, should develop credit basis and perform the function of interest rate mechanism. All of these require China to deepen financial reformation, realize marketization of interest rate, quicken formation of modern financial system, so as to promote the transfer of structure of transmission mechanism and develop its effectiveness.