Empirical Analysis On Regional Effects Of The Monetary Policy

Monetary policy is a series of policies and measures formulated by the country’s monetary authority in order to achieve the specific economic goals, aiming at regulating the money supply and credit. The traditional theory of monetary policy shows that monetary authority of a country should implement a unified monetary policy at the national level, and the unified monetary policy has a uniform effect within the country. But that is not the case. Because of the economic development asymmetry in different regions, a unified monetary policy produces significantly different effects in different regions, causing the regional effects of monetary policy. Since the reform and opening up, despite of the rapid development of China’s economy, the regional differences in economic and financial level is gradually increased. Therefore, testing the existence of monetary policy regional effects and analyzing the factors which would cause the regional effects of monetary policy is of great help to ease China’s regional effects of monetary policy as well as realizing the coordinated development of regional economy.Firstly, on the basis of reviewing related literatures about the regional effects of monetary policy in domestic and foreign countries, the article summarizes current research situation of regional effects of monetary policy. The monetary transmission mechanism is divided into two categories which contains monetary transmission and credit transmission. And these two categories will be segmented any further in order to fully describe the transmission mechanism of monetary policy, clear monetary policy transmission effects and its action mechanism and provide a theoretical basis for proving the existence of monetary policy regional effects. Secondly, it splits the regional effects of monetary policy into the monetary policy’s long-term regional effects and the short-term regional effects. Then panel models were used to analyze the long-term regional effects of monetary policy. The existence of short-term monetary policy regional effects is proved by SVAR model so as to produce a more comprehensive analysis of existence of the monetary policy regional effects. Again, this paper first using the charts, from the three major aspects of regional economic environment, regional financial intermediaries and regional economic body, which were subdivided, theoretical analyzes the causes of regional effects of monetary policy in China from multi-angle. Then through the establishment of a regression model, the article explores the causes of regional effects of monetary policy through empirical analysis. Finally, based on the previous analysis and the successful experience of abroad, this article proposes several suggestions to ease our country’s regional effects of the monetary policy.The main conclusions are as follows.(1)In the short term, the article generates that the order of per capita real GDP’s sensitivity to M2shocks from strong to weak is eastern, northeastern, central and western areas. The order of BCPI’s sensitivity to BM2shocks from strong to weak is central, eastern, north-eastern and western. This fully shows that the presence of short-term regional effects of monetary policy.(2)In the long term, the order of per capita real GDP’s sensitivity to M2shocks from strong to weak is eastern, central, northeastern and western. The order of BCPI’s sensitivity to BM2shocks from strong to weak is central, northeast, east and west areas. This fully shows that the presence of long-term regional effects of monetary policy.(3)There are three factors which are regional differences in economic environment, regional differences in financial intermediation and regional differences in economic subjects that cause our country’s regional effects of monetary policy. And the east is more sensitive to the variation of monetary policy than other areas.Innovation of this paper is as follows.(1)For the analysis of the existence of short-term regional effects and long-term regional effects of monetary policy, basing on the panel model and the SVAR model constructed by Real GDP per capita in the original and broad money supply M2, this article builds new panel model and the SVAR model constructed by the consumer price index rate of change of the rate of change BCPI and broad money supply rate of change BM2, in order to analyze the sensitivity of monetary policy shocks from the most important two economic variables (output and price) in daily life.(2)In the thesis, the economic environment were subdivided into economic level and degree of market development; the total amount of financial intermediation were subdivided into financial structure and financial intermediaries; economic entities were subdivided into corporate structure factors and consumer behavior. And the article builds a regression model to empirical analysis of the reasons basing on the existing theoretical analysis. This is not only to overcome the limitations of a single perspective on previous studies, but also make the analysis of monetary policy’s regional effect more convincing.