An Empirical Study On Efficiency Of Transmission Mechanism Of China's Monetary Policy

Monetary policy is for attaining established economy's objectives point to a central bank applying the various means to adjust currency supply level or credit amount to affect macro-economy guiding principle. Monetary policy transmission mechanism is that the central bank wields the various tool of monetary policy, required reserves and the financial market financing condition and then adjusting every banking institution's direct or indirect etc., controls entire society's currency supply level and credit all quantity then, makes enterprise , the resident adjust self economic behavior unceasingly, reaches new even national economy process.The main body of this book inspects some monetary policy transmission mechanism theories and schools, for instance, Keynes school transmission mechanism theory , currency school transmission mechanism theory and new Keynesianism economy school monetary policy transmission mechanism theory having studied variety that west economy there exists in theory middle. There are various schools making an explanation in the economy how to affect reality to monetary policy, thinking that monetary policy is transmitted by including interest rate in general, conduction channel, credit conduction channel, finance assets price conduction channel and exchange rate conduction channel. All the economy schools have not the same unified foothold, for research easy to, the main body of a book have quoted Mixijin (1995)'s classification law, transmission mechanism divides monetary policy into two major kinds , namely currency channel and credit channel according to currency and replacement other different between assets.the central bank of china monetary policy handles process at present is, changing arousing government interest rate first, government interest rate change arouses short-term interest rate of money market alteration again, then the monetary policy conduction take financial market (include money market, credit marketplace , foreign exchange market and bond market etc.) as backing mainly, time limit structural adjustment, affects the currency market rate by the fact that the altitude correlativity composes in reply one by one interest rate between the marketplace long range interest rate, and then via the currency channel and the credit channel to affect a total demand.Because china is different with other countries, the financial market does not develop very well, the rate is restrained, the transmission mechanism is not very effective in China. Our country monetary policy gives first place to credit channel before 1994. with the development of Chinese money market and capital market after 1994, the credit channel falls down, But the credit channel also is on the first place.Well, what's the fact indeed? Can we get the above conclusion from the perspective of empirical tests? With the development of domestic capital market, changing of financial structure and maturing of monetary policy after 1994, is the monetary transmission mechanism of China effective, which channel do the mechanism transmit, the monetary channel or the credit channel? In chapter3, in line with the study by scholars at home and abroad, I test the above issues in the sample period 1994-2005.After reviewed the development and change path of the monetary policy in China, I establish a VAR system including M1. Total loans by financial institutions, industrial added value and the inflation rate, impulse response analysis was employed too. The empirical results implied that both the monetary channel and credit channel of monetary transmission are effective.The main conclusions were as follows:1. monetary policies transmit in the monetary channel have a significant short run effect on price stability, however, the long run effects is not significant. The empirical test also revealed a positive relationship between economic growth and money supply, this implies that we can adjust the money supply to boost economic in a certain extent.2. monetary policies transmit in the channel of credit couldn't stabilize the price, nor promote economic growth.3. By comparing the two channels of monetary policy, I find that after 1994, the monetary channel has a advantage in stabilizing prices and promoting economic growth over the credit channel, this reflects the effects of targeting the money supplement of central bank.