The Analysis Of The Efficiency Of Monetary Policy In China

Monetary policy is the primary means of macroeconomic control by centralbank. It plays an important role in stabilizing prices、full employment、promotingeconomic growth and keeping balance of international payments. So the effect ofmonetary policy has always been the focus of the government and the academia.Before the U.S. subprime crisis occured, our government put forward the goalof preventing economic growth from becoming overheated and to prevent pricesfrom rising structural to inflation, so the central bank pursued a tight monetarypolicy; As the U.S. subprime crisis occurred, in order to avoid it spreading to ourcountry economy, our country government and central bank launched a proactivefiscal policy and monetary policy which makes our country enter the high-inflationtimes; Facing the high inflation pressure, the central bank frequently raised thereserve ratio and benchmark lending and deposit rates; due to the European debtcrisis and Japanese earthquake brought great pressure to china exports,whichleading to the coastal provinces for a large numer of small and medium-sizedforeign trade enterprise collapse, besides the small and medium-sized enterprisecapital chain tension which due to tight monetary, strengthen our country economydownward pressure. Based on domestic and foreign pressure, Central bank wasforced to cut the reserve ratio three times and to reduce lending and deposite ratetwice times since the end of2011, in order to maintain steady and rapiddevelopment. In fact, our country’s economy wasn’t out of the haze of inflation.Sothe paper thinks the central bank monetary policy is lack of stability, the regulationon the economy effect needs to be empirically tested.This research mainly studies for the impact of money supply on output andprice-level. so we chooses related monetary policy index monthly data thatincluding monetary policy measure (M1, the benchmark lending rate), the effect ofmonetary policy index (CPI, GDP) from January2007to match2013. Then usesunit root test cointegration test and VAR model impulse response and variancedecomposition to make an empirical study of the effectiveness of the monetarypolicy of our country since U.S. subprime crisis. Come to these conclusions:①due to there are many factors to offset the effect of monetary policy, No matter inthe moderately loose or tight monetary policy, the reserve ratio is used to adjust themoney supply is not ideal;②Because our country monetary policy transparency islow, cannot guide the public to form a reasonable policy expectations, lead to usethe money supply to adjust the consumer price index is not ideal in moderately tightmonetary policy, but under the moderately loose monetary policy, money supplyhas obvious influence on the consumer price index;③mainly due to thenon-market interest rate and money supply endogenous, lead to no matter in themoderately loose or tight monetary policy, the money supply (M1) and theinfluence of the benchmark lending interest rate on output is not very ideal;④Monetary policy exsits a time lag.