The Research On The Impact Of The Shadow Banking System Towards China’s Monetary Policy Transmission Mechanism

The US subprime mortgage crisis in 2007 triggered a global financial crisis. And the role of the shadow banking system in crisis has drawn the attention of the scholars. However, most of these studies take the foreign shadow banking system as the object, and mainly focus on the risk and regulation of the shadow banking system. In fact, China’s shadow banking system has its own characteristics, and its development will affect China’s monetary policy transmission mechanism, and interfere with the implementation of monetary policy. Therefore, a further research on the impact of the shadow banking system on China’s monetary policy transmission mechanism is full of practical significance for the successful implementation of the central bank’s monetary policy and maintaining financial system stability.This paper uses some research methods, such as summarized methods, comparative analysis, theoretical analysis and empirical analysis. Firstly, the paper analyzes the characteristics of the shadow banking system and monetary policy transmission mechanism in China. Then, it analyzes the influence of the shadow banking system on the different nodes of the monetary policy transmission mechanism and specific conduction channels theoretically. Finally, it establishes a VAR model to verify and analyze the conclusion from the perspective of empirical further. The paper gets the following conclusion:China’s shadow banking system is based on the bank’s credit assets; Nowadays, the main monetary policy transmission channel of China is Credit Channel, Money Chanel is in a subordinate position but the effect of the Money Chanel is strengthening; The credit creation of shadow banking system helps to affect the transmission mechanism of monetary policy; The expansion of the shadow banking system has weakened the effectiveness of monetary policy instruments; By affecting the stability of the money multiplier, the money turnover rate and the availability of the data, the shadow banking system reduces the controllability, relevance and measurability of intermediate targets, so the M2 statistics cannot fully reflect the real value of the market money supply; The liquidity supplied by the shadow banking system will lead to inflation, but it has little and unstable influence on economic growth because it can help to financing the firms. For specific terms of the credit channel, the shadow banking system provide the company with alternative financing channels, and it has Substitution effect towards the bank loans, so it creates a "shadow bank lending channel"; as with the monetary channels, interest rates of shadow banking system are Market-oriented, which will promote the process of the deposit interest rate Marketization and increase the interest rate sensitivity of economic agents.These results tell us that we should correct our opinion of shadow banking system, and balance its innovation and risk. And we should also strengthen the cooperation of the regulatory authorities, and strengthen the statistics of shadow banking system and share relevant information of the shadow banking system. As with the monetary policy, the central bank should integrated use the quantitative and price instruments to control the Monetary policy, also the money supply of the shadow system should be counted into the money supply statistics and should be update timely.