The Regional Effects Of Monetary Policy

There are obvious economic growth developing gaps among the eastern, middle and western parts. But the People's Bank of China implement unified monetary policy nationwide that will certainly lead to its effects on regional differences. The differences participation of Stock market in various areas, will have an impact of monetary policy effects. This paper want to study the impact above mentioned, and find out the inherent law between them, then give some policy recommendationsThis paper explain the difference participation of stock market from the difference of the number of listed companies, the amount of stock market trading, stock market capitalization the amount of financing through the stock market and the number of A shares accounts in the eastern, middle and western part. Those indexes prove that the degree of participation in the eastern region is much higher than the others, while the central and western region is little difference. As analysis the relationship with the monetary policy and stock market,we find out that the stock market have a positive effect on the output, but the impact on price is uncertain.Stock market will increase the money supply through changing the money multiplier, at the same time, a high degree of the stock market participation will affect the demand for money. Stock market will have different influence on the effect of monetary policy tools, the high-degree of the participation of the stock market will increase the effect of interest rate policy and the open market operations but will weaken the effect of deposit reserve rate and the rediscount rate policy. The effect between stock market and monetary policy transmission mechanism can be analyzed from the wealth effect, liquidity effect, Tobin's Q effects and balance sheet effects. We can infer that those impact is nearly positive.This paper use Empirical Analysis to examine the regional monetary policy effect by using Impulse response functions. Reveal that the policy responses in eastern is higher than in the other parts. Further analysis the effect from the stock market to monetary policy in various regions. Refer to the pulse diagram (monetary supply changes from the stock price shocking) find that the response of the eastern is bigger than the others.And the responses of the effects of Monetary policy transmission through stock market in eastern is bigger than in the other regions.Finally, we build the regression model by the biggest impulse response value and capitalization, funding amount, account number, transaction amount about stock market, also find that there is a positive impact on the stock market development to monetary policy effect.As a result, it suggest that we should Narrow the differences in the stock market in various regions. The government should encourage enterprises in central and western regions to go public, at the same time encourage residents invest in the stock market.