The Study Of Validity Of Monetary Policy Under The Background Of China's Excess Liquidity

According to 2007 Central Economic Work Conference, hedge liquidity surplus in 2008 is still an important task of monetary policy.the next time the central bank may have to continue to face liquidity of the banking system excess supply situation ,continue to implement a prudent monetary policy, make comprehensive use of various monetary policy tools, reasonable regulate and control money supply and credit volume. That the bank effectively eased the problem of excess liquidity will be the main objective of the central bank's monetary policy. Based on real background of the current excess liquidity, this paper researches the effectiveness of monetary policy.This study reached the following conclusions. Through an Empirical Analysis of the introduction of variable excess liquidity, the role of M2 to GDP is weakening, and this excess liquidity that makes monetary policy on output M2 intermediary indicates weakened role that curbed the effectiveness of monetary policy. Therefore, the effectiveness of China's monetary policy needs to be raised.Given CPI inflation index to replace variable of the liquidity surplus the impact of LIQUID reach the peaks at the second period. M2 impact on the CPI in the period are to be strengthened, based on the heavy flow of excess pressure .This would lead to blind expansion of bank credit scale and increase the impulse to bring overheated investment. A significant increase inflationary pressures, significant excess liquidity will increase inflationary pressure and risk of the banking system.The number objective is the main intermediate objectives of China's monetary policy objectives. As China's economy, speed up the process of the international financial, measurement and controllability of monetary supply is weakening, the need for new indicators system is urgent. Through the analysis of CC-LM model China's monetary policy transmission mainly relies on banks, other traditional financial institutions and credit expansion .Through strengthening the size of the credit market and credit management, we can effectively influence economic activity. This is related to the dependence credit rationing in China's enterprises and the banking and other financial institutions. the influence of interest rate for the Chinese economy is relatively weak.The interest rate transmission mechanism does not work.To a certain extent, it affected the implementation of China's monetary policy.