The Research On The Effectiveness Of Monetary Policy Transmission Mechanism Based On VAR Model

An active and effective monetary policy has always played an extremely important role in the country’s macro-control. In accordance with the regulations of the People’s Bank of China, the target of the monetary policy is to stabilize the value of the currency so as to promote the development of the economy. The purpose of the paper is to explore the regularity and quantity effects of the monetary policy transmission mechanism and work out the effective measures to improve the effectiveness of monetary policy transmission mechanism. Analyzing the process of both internal and external conductions in and out of the financial system step by step, with the knowledge of econometrics, so as to explore the law and the effect to do further research for the proper making of the monetary policy.The monetary policy transmission is characterized by staged. It always has two stages, the first stage is inernal part (the tool variable of the monetary policy→the operating target variable→the intermediate target variable), and the second stage is external part (the intermediate target variable→each conducting economic system represent variables→the final target variable) This paper applies the statistical method to select and check the relevant variables. It aims to find out the long-term effect relationship and the amendments relationship of short-term dynamic between the variables with the establishment of the VAR model and measures the quantitative effect of the conduction after the policy influence with the impulse response function and variance decomposition, that is, the direction and the intensity of the impulse response, so as to do research on the conductive method and its effect of the monetary policy.The paper introduced the transmission mechanism of the monetary policy theory. It’s a systematic study of the transmission mechanism of China s monetary policy framework. The mainly study is the effectivness of the two phase of the monetary policy conduction mechanism. Buiding the monetary policy transmission mechanism of internal and external conduction model. The Granger causality test is used to diagnose the variables. Based on cointegration test, the impulse response function and the variance decomposition are used to analyze the quantitative effect of the policy in the internal conduction of the financial system. Paper puts forward three measures to improve the efficiency of China’s Monetary policy:perfecting the action of monetary policy decision-making body and implementor; perfecting financial market environment for monetary policy transmiting; Strengthening the coordination between monetary policy and other policy.