The Research On The Role Of Banks In Monetary Policy Transmission In China

The effect of monetary policy relates to whether the monetary transmission is smooth directly. That is why the research on the monetary transmission is still a hot topic today. Commercial banks play a very important role in the transmission mechanism in the indirect finance market. As we know, commercial banks in China are main contributor in finance market, so the effective of monetary policy depends on the reaction of commercial banks to the central bank's policy intension.Commercial banks'behavior has changed since the central bank released the control to the loan of banks in 1998. Through the analysis on the balance sheet of banks, we find that the behaviors of commercial banks differ from the aim of the central bank's monetary policy compared to their behaviors before 1998. Then this paper empirically analyzes the transmission mechanism of monetary policy in China by the Unit Root Test, EG Test and Granger Test. The result shows that the relationship between the credit behaviors of commercial banks and GDP is cointegration in the long term, but the contribution of loans to GDP has become less compared to its before 1998. And the loan of banks was Granger cause of GDP and M2 before 1998. But the loan is not Granger cause of M2 anymore after 1998. Besides the change of the economic environment and of the central bank, the change in the commercial banks'management is another important reason. In the end the paper has put forward policy suggestion on the basis of conclusion.The study aim of this paper is to help resolve the institutional problems of our banks for which hampering the transmission of monetary policy and make helpful advice for advancing the effect of our monetary policy transmission.