A Micro-foundation Study Of Monetary Policy-from The Perspective Of Bank Lending Optimization Behavior

In recent years, China's monetary policy has been adjusted frequently with a large amplitude. Especially from 2006, the People's Bank of China (PBoC) has promoted the Statutory Reserve Ratio for 27 times with a range of 11%, to control bank's liquidity under the great pressures of inflationary. The impact of Monetary policy on the market players in the real economy and the policy effect level, have drawn great attention from the government and academia.Commercial banks' lending decision - making and other micro - behaviors have a huge impact on monetary policy transmission. The scale of credit supply is the key variable to connect the Central bank's monetary policy with the real economy. In recent years PBoC monetary policy's effect has been weaker than expectation. To study the reasons and make recommendations for future policies from the perspective of bank lending optimization behavior, is of great significance, theoretically and practically.This research has made related literature review on the transmission of monetary policy, monetary policy micro - foundations and bank lending decision - making. Based on the theoretical analysis of bank lending's effect on monetary policy, in accordance with the real features of china's bank credit behaviors, we have analyzed bank lending behavior by establishing an optimization model under a bank profit maximization target. After that, we apply a vector autoregressive model (VAR) with China's real datum to test the theme that has been described before. The study find that banks'lending decision-making has a decline response to monetary policy, which mainly because of the"pull force"from the real economy. The formation of the"pull force"is because banks act as market players who pursue low-risks and high-margin, and also because of the effects of expectations on the coming economy situation made by the market players, especially by banks. Therefore we conclude that in China the bank lending scale has a certain degree of endogenous and is not absolutely controlled by the Central Bank. It's to say, commercial banks are not neutral monetary policy passer and the credit channel effect is reduced.Under the theoretical and empirical researches, we suggest that China's monetary policy should not be too concerned on the money and credit supply, but pay more attention to adjust and guide money and credit demand. For monetary policy's effect on the market players'expectation is even greater than monetary policy tools'direct impact, the PBoC should strengthen the management of market expectation. Also, Policy stability to a certain degree can improve the sensitivity of micro-corpus on monetary policy. Sustained and steady monetary policy is conducive to shape consistent expectation of market player. In the last part of this paper, we give out some suggestions.