The Effectiveness Of Monetary Policy Research In China Under Financial Frictions

The theoretical think financial frictions from scratch to existence, from think perfect to imperfect; As the financial frictions’effects faded in, their importance is recognized gradually. Especially, the role of financial friction was further amplified in the financial crisis in 2008, and then it caused concerns widely.In addition, with the economic environment is becoming more and more complex, and the relationship between different subjects in the financial market is becoming more and more close, some impulse changes may cause larger macroeconomic fluctuations. So how to make effective monetary policy has become a major concern for the authorities.Since the DSGE model arised, it became widely famous for its rational expectations, reasonable assumptions such as sticky sticky prices and wages. Based on the new Keynesian DSGE benchmark model, we creat EFP model and CC model which including family, producers, government, entrepreneur and banking sector. And then respectively discuss monetary policy shock and productivity shock on the macroeconomic variables of the two models.In the selection of macroeconomic data, we selects inflation, consumption, investment, and wage from the first quarter of 2005 to the fourth quarter of 2014, the quarter data can eliminate the influence of randomness. Then we refer to other literature to parameter calibration of the data, and use the method of Bayesian estimation to estimate data. Finally, we obtain the impulse response figures of the monetary policy impacts and the productivity shock impacts and we compares the figures full of comparative analysis. The conclusion follows:First, when the economy is confronted with a negative impact of monetary policy, in the two models, the selected five economic variables are at the same size at sight; Longer term, the CC model responses to the impact is bigger than rhe EFP model in the process of returning to balance, but both models can reach the original equilibrium level. Also, investment and wage need less time to achieve the equilibrium level.Second, when the economy is confronted with a positive productivity shock, in addition to the inflation, the remaining two model variables prompt response is the same. Longer term, the CC model’s economic variable response to the shock is larger. Seeing from the deviation, the output and investment do not conform to the reality, the rest variables’deviation shows that the CC model is larger. In addition, there is an obvious feature is that the wage is affected the biggest when facing positive producit-ivity shock.