Research On Consumption Effect Of Monetary Policy In China

Export is the main impetus of China's economic development, but its external environment has been deteriorating constantly since the outbreak of the American financial crisis in 2008. It is urgent to transform economic growth pattern."Expanding Domestic Demand"becomes one of the main objectives of macro-economic control. This paper mainly studies the influencing degree of monetary policy on growth of domestic demand.Reviewing the literatures, this paper summarizes achievements in consumption theory and monetary policy asymmetry. And then it analyzes the influencing factors of consumption, combing the mechanism of monetary policy transmission and the reaction of consumer behavior to monetary policy. The result shows that many factors will affect consumption besides monetary policy, some of which are related to the economic stages where they are. It is necessary to control these factors so as to reflect the impact of monetary policy on consumption more accurately. By employing the empirical analysis, this paper also finds the impact of monetary policy on consumption varies in the different economic stages. So, this essay builds a LSTVAR model to analyze the impact of monetary policy on consumption. This paper analyzes the impact of money supply growth rate; credit growth rate and interest on consumer behavior by using the data for January 1991-December 2009. It employs the growth rate of GDP to be the proxy variable of economic stage, that is the mechanism transmission variable in LSTVAR model. The empirical results are as follows: the positive impact of incremental credit growth causes the positive changes in actual consumption in the period with low growth rate, and the negative changes in the period with high growth rate; the positive impact of incremental money supply growth has few impact on the actual consumption in the low growth period, but causes the negative changes in actual consumption in the period with high growth rate; in both periods the positive impact of interest rates on the actual consumption are in the same direction, but in the low growth period, the shock from the interest rate influences the actual consumption more significantly.