The Research About The Effect On Transmission Channels Of Monetary Policy Under The Capital Adequacy Ration Supervision

Although the PBC has abolished the credit regulation since 1998, the credit channel is the main channel of the transmission mechanism of monetary policy in our country. In this process, commercial banks play an important role and be directly relating to the effect of the monetary policy. Hence, any factors that influence banks'credit decision may affect the transmission mechanism and the validity of monetary policy.Deposit reserves and capital adequacy ration supervision are two most important regulation posed on commercial banks by bank regulatory authority, both of which have an effect of loan reduce. Deposit reserves regulation has been a traditional monetary tool, and has attracted a lot of attention and research, while the capital adequacy requirement has been neglected for a long time. So track the interaction between the monetary policy and the capital adequacy ration supervision is necessary and meaningful.In this paper we use a model of bank behavior to investigate the interaction between monetary policy and bank capital regulation. This interaction is not satisfactorily analyzed in the textbook deposit multiplier model because bank equity is assumed to be exogenous in that model. Essentially, the textbook model implies that an aggressive bank regulatory authority, imposing a high capital requirement can thwart a loan expansion desired by the monetary authority because the banks would lack'required'capital. The multiplier model, however, is silent on the resolution of the conflict and on the implications for the longer run nature of the loan/reserve multiplier. Our contribution is to endogenize the bank equity decision while retaining a deposit multiplier perspective.This dissertation consists of 7 chapters, and the contents of each are as follows:Chapter one, the preface introduce the research background and relating papers summery, more important, we put forward the question and research object. Chapter two, in the first place, briefly introduces the capital adequacy ration supervision theory and every kind of transmission channels of monetary policy. Basically, there are two main channels of the transmission mechanism of monetary policy, and they are the money channel and the credit channel.Chapter three to Chapter five is the main body of this article. Chapter three careful explores the effects of relative factors regarding banks'manner and finance on credit transmission channel, including the transformation of regulation manner of central bank direct regulation. Chapter four tells how the capital adequacy ration supervision affects the money channel, and the way it displays in China nowadays. On the other hand, Chapter five tells how the capital adequacy ration supervision affects the credit channel, especially its realistic meaning in China.Chapter six, to perfect the dissertation, we further research the situation when banks supplement their capital by different means to satisfy the regulation requirements, how the transmission channels respond.In chapter seven, we have conclusions as follow: comparing with the banks with adequate capital, the banks with less capital will have applicative and probably lagged actions, and the actions here mainly mean the changes of the loan decision. Also, in a general way, the regulation of capital lowers the sensitivity of actions when the banks come to face the monetary policies, the higher requests level and the lower amount of capital will raise opportunity cost through raising the probability to fail to meet the capital restriction, and exert a negative effect on the transmission channels and the result of monetary policy.In short, it is clearly to find that capital regulation plays an important role in the regulation of banking and the conduction of the monetary policies. Bank regulatory authority should make allowance of this factor when satisfies certain monetary policy or choose way to supplement banks'capital.