A Study On The Transmission Mechanism Of Monetary Policy In China

The traditional financial and economic relationship refers to promoting economic development and maintaining price stability through the assets and liabilities of the banking system.But in recent years,with the continuous development and innovation of China’s economic and financial products,the financing mode of the real economy has gradually changed,the direct financing which is represented by non-bank financial institutions has become more and more supportive to the real economy.In such a realistic context,the regulatory authorities should change the former idea of monitoring money supply and strengthen the management of macro-liquidity.Based on this,China came up with the scale of social financing indicators,reflecting the support to the real economy from the perspective of whole society money supply.From 2016 onwards,the government work report clearly pointed out that the scale of social financing and money supply are both China’s monetary policy control indicators.Due to the scale of social financing was proposed not for a long time,China’s social financing scale and monetary policy transmission mechanism is still in its infancy.At the same time,according to the related research results,the financial market occupies an important position in the theory of monetary policy transmission mechanism,and the market sentiment will affect the fluctuation of the financial market,as well as the investment behavior of the enterprises and residents,thus affecting the implementation effect of the monetary policy.Therefore,it is of great significance to study the linkage between the scale of social financing and the monetary policy in China,and how the market sentiment will affect the effect of monetary policy transmission.Based on the theory of social financing and the theory of monetary policy transmission,this paper further discusses the process of monetary policy financing scale transmission,and calls the influence of monetary policy on the scale of social financing as first-order transmission,the social financing scale to the ultimate goal The effect is called second order conduction.On the basis of the theoretical analysis,this paper establishes the VAR model to analyze the influence of monetary policy tools on the scale of social financing in the first-order conduction stage.In the second-order conduction stage,this paper takes the 56 macroeconomic factors into the analysis framework,and establishes the FAVAR model to analyze the impact of social financing scale on economic growth and CPI.At the same time,two principal component analysis methods are used to construct the market sentiment comprehensive index,which is included in the original FAVAR model,and analyzes the effect of market sentiment in the process of monetary policy transmission by comparing the empirical results.The results show that: First,the monetary policy on the scale of social financing is effective,a modest increase in the scale of social financing can promote investment and consumption,thereby promoting economic growth,but also cause price increases.When market sentiment is high,businesses and residents are optimistic about the future economic outlook and will increase their current investment and consumption,thereby boosting economic growth.Second,the scale of social financing and interbank interest rates are inversely changed,with the base currency,M2 was the same direction changes,and the change in lending rates more sensitive to reflect more quickly,but in the long run,in the long run,the accumulation of base money is greater.Third,the scale of social financing and power generation,CPI has a close relationship,power generation and CPI and social financing scale was the same direction.In the face of the positive impact of the standard deviation of the scale of social financing,there is a lag in the response of the generating capacity,and the CPI is in the immediate response.Fourth,after the conduction of the market sentiment index in the process of the two stage,there is no lag period of economic growth,the effect of growth is obviously improved;the price rise is longer,but no immediate response.According to the analysis results,in the end of this paper,it puts forward some policy suggestions on how to improve the effectiveness of monetary policy in China.