The Study On Regional Difference Of Monetary Policy Effect

Monetary policy is the macro-control policy, which is based on gross adjustment. But in a large economy, because of the regional differences in the level of economic and financial developments, a unified monetary policy in the implementation process in every region, may produce different results. Since implementing the reform and open policy, the regional economy development is not balanced, has the level of development disparity obviously "three economical regions", the developed eastern area,the developing middle area and undeveloped west area, the regional financial disparity in our country is also unceasingly expanding, comparing the financial total quantity, structure and efficiency, the western area all by far falls behind the eastern area. Under the background of indirect monetary policy regulation, the monetary transmission effect is more and more rely on the micro financial system. Because of the asymmetric regional economic and finance development, different regions will react differently to the same monetary policy. This will finally result in asymmetric regional effects of monetary policy. For example,since 2003 the People's Bank of China has adopted a series of tighten monetary policy in view of the economy partial hot, these measures have not considered the difference between the east and west area,therefore they have produced the totally different regulative results, namely during suppression economical excessively hot of the east, they have had the big policy impact actually to the mid-west area economy which has just started.So study the asymmetric regional effects of monetary policy, then to discuss the need of different policy in different regions, has the real meaning to reduce the difference between the regions and promote the coordinate development among regions. This paper does the empirical analysis from both investment and consumption effects of monetary policy, than explain the regional differences of monetary policy effects from three aspects: transmission environment, transmission medium and transmission receptors of the monetary policy transmission process, finally, put forward some viable policy recommendations. It has five parts:Chapter 1 introduces the background and the significance of this topic, and the research on the status quo.Chapter 2 takes a brief overview of the monetary policy transmission mechanism. It concludes the four main theories, including the transmission mechanisms of interest rate channel, of credit supply channel, of assets price channel, of foreign rate channel. Keynes first put forward the modern theory of monetary policy, as the monetary policy transmission theory, He believed that money supply changes interest rates first, than leads to investment, employment and income and the cost of production, the change of the price level is an indirect impact. The Post Keynesian Economics developed the credit transmission mechanism of monetary policy transmission on the basis of information asymmetry economics and imperfect competition micro-economics. They considered the intent of the central bank's monetary policy can lead to the changes in investment and production activities of enterprise, this made the monetary policy transmission theory more closer to reality. The most representative asset price transmission mechanism is Tobin's q theory and the life cycle theory of Modigliani, they thought the changes in the money supply will destroy the balanced state of every economic entity's portfolio and then reorganize all assets to reach a new equilibrium. The transmission mechanisms of exchange rate channel is that the change of the domestic money supply bring on the change in the exchange rate, effect on the net exports, than have an impact on aggregate demand. Studying the western theory of the monetary policy transmission can provide a more comprehensive theoretical framework, the ideas of analysis and research approach for us to discuss our monetary policy transmission channel.Chapter 3 had done the empirical test of the regional differences of the monetary policy transmission effect. First, every variable series was processed the Unit Root Test and Granger Test to make sure that there has the causality between the variable series. Than, constructing the VAR model, using the impulse-response function to analyze the effect of the monetary policy transmission from the both investment and consumption effects. The conclusions are: 1. From the impact on the investment in fixed assets of money supply, in the face of tight monetary policy background, the reduction of the money supply have had a negative impact on the spot, But the speed and intensity of the reaction there is a notable difference between the regions. The response to the monetary policy in the eastern and central region is stronger and longer during the convergence than the western region, so the investment effect of monetary policy has the distinct regional differences. 2. From the impact on the total retail sales of social consumer goods of money supply, response time to the monetary policy are closer between the eastern and the western region, but there is a significant differences in strength between two regions, so the consumption effect of monetary policy has the distinct regional differences.Chapter 4 discusses the causation of the regional differences of the monetary policy transmission effect from three aspects: transmission environment, transmission medium and transmission receptors. Firstly, the transmission environment of monetary policy, the regional economic development is uneven, particularly industrial and the degree of currency market has the regional disparities; Secondly, the transmission medium of the monetary policy, scale of financial markets, the number, quality and distribution of financial institutions have significant regional differences; Finally, transmission receptors of Monetary Policy, there are notable regional differences in nature and source of companies, in consumption and savings behavior of residents. Because of these differences in such three aspects, result in the regional differences of monetary policy transmission efficiency.Chapter 5, firstly, introduces the major tools of monetary policy used by central bank at this stag. Than, put forward the proposal about regionalization of monetary policy according to the regional economic and financial differences: vigorously develop regional financial institutions, optimize regional financial organization system; Actively develop regional financial market, improve the system of regional financial markets; Optimize financial macro-control, establish different level of monetary policy; Based on the goal to establish a unified financial market, establish a regional financial system in order to straighten out the transmission mechanism of monetary policy in the central and western region. As the same time, regionalization of monetary policy tools should also be considered, for example, further differentiated reserve policy reform, strengthen the regional incline of reloan policy related to the small and medium-sized financial institutions, strengthen the regional Monetary policy, increase the financial support of the western region, eliminate the block of transmission channel in undeveloped areas, reduce the gap between the eastern and western area, improve the harmony development of the region economy and finance.