The Study Of Herding Behavior Of Credit Transmission Of Monetary Policy In China

In the process of planned economy to market economy transition, although themarketization of interest rate and financial markets are in improvement, the overalllevel is not high. The existing financial system has restricted the interest ratetransmission channel, exchange rate transmission channel and asset price transmissionchannel effectiveness。In result, the credit channel has been China’s main monetarypolicy transmission channel. In China, the financial market is not developed, andenterprise’s direct financing proportion is low. Therefore, commercial bank’s loanbusiness is the microcosmic foundation of the currency credit transmissionmechanism. If the central bank’s monetary policy can go through the credit channel toachieve the intended purpose depend on the lending behavior of commercial banksthat is active, sensitive and timely to signal of central bank’s monetary policy reaction.Therefore, how bank loan herding behavior on credit transmission channel restrictsCredit transmission channel is the focus of this paper.On the basis of China’s financial system and financing structure present situation, wethink the credit channel is the main transmission channel of monetary policy.However, banks as special enterprises operate currency, as other enterprises, banks arealso the pursuit of maximum profit company. Due to credit information asymmetryand incomplete information, the bank manager would mimic other bank lendingpractices, and this cause herd behavior in the process of credit loan. therefore, thispaper uses a simple model of game theory, this game theory model prove to be in thepresence of herding behavior. in the certain extent, herding behavior of credit loanhinders the credit transmission channel effectiveness, also affect the effectiveness ofmonetary policy, In last,we put forward the related policy suggestion and prospect.