The Impact Of Banking Concentration On The Credit Transmission Channel Of Monetary Policy In China

As a medium of monetary policy transmission,financial institutions play a significant role in the effectiveness of monetary policy.And as the main body of financial institutions,commercial banks play an important role in the transmission of monetary policy.With the development of reform and opening up and financial reform,banking market structure in China is undergoing profound changes.From the people’s Bank of China,a banking institution,to a large number of commercial banks participating in the competition,the structure of the banking industry is becoming more and more competitive.As the main body of the banking industry,the behavior of commercial banks will be affected by the competition of the banking industry.The degree of competition in the banking industry will affect the transmission of monetary policy by affecting the behavior of commercial banks,and ultimately affect the implementation of monetary policy.This paper studies the influence of the concentration degree of Chinese banking industry on the credit transmission channel of monetary policy.Firstly This paper summarizes the related theory,including the general situation and structural changes of banking industry in China,the general situation and the main transmission channels of monetary policy in China,and the theory of the influence of bank concentration on monetary policy,which lay the theoretical foundation for further research and analysis.Secondly,this paper collects and analyzes the relevant data,and makes an empirical analysis.The empirical analysis is divided into two parts: In the first part,adopting the2000-2015 quarterly time series data,we use the VAR model as the proxy variable of monetary policy,and then examine the relationship between the bank concentration and the proxy variables of monetary policy.In the second part,adopting the 2000-2015 annual panel data of 14 banks in China,We establish the model,use least squaresmethod of fixed effect model to estimate the model,and examine the relationship between bank concentration and credit transmission channel of monetary policy.The main conclusions of this paper are as follows:First,the degree of concentration of the banking industry in China is decreasing,and the competition among banks is becoming more and more fierce.At present,China is in the banking structure of monopolistic competition.Second,bank credit transmission channel is still the main channel of China’s monetary policy transmission.Bank credit transmission channel in China is effective.Impulse response function shows that monetary policy shocks affect GDP,Loan,M₂ negatively,and affect CPI positively.That is to say,when implementing restrictive monetary policy,Interest rates will increase,which will causes that GDP,Loan,M₂ will decline,and CPI will rise.It shows that the impact of monetary policy will have an impact on the intermediate target and final goal of monetary policy.Panel data show that the coefficient of △MP_t and △MP_t-1 is statistically significant.Changes in monetary policy have significant impact on credit growth,which proves that the credit transmission channel of monetary policy is effective.Third,changes in the concentration of the banking sector will have an impact on the credit channel of monetary policy transmission.When the bank concentration is more than 38.48%,there is a positive relationship between bank concentration and monetary policy credit transmission channel.And When the bank concentration is less than 38.48%,the relationship between the bank concentration and the credit transmission channel of monetary policy.With the deepening of banking industry in China,the credit transmission channel of monetary policy will be more and more effective.Fourth,compared to large state-owned commercial banks,credit growth in small and medium banks is more likely to be affected by changes in monetary policy.Finally,from the macro level of government,the medium level of the banking industry and the micro level of the banking enterprise three aspects,this paper puts forward some policy suggestions to improve the efficiency of China’s monetary policy transmission channel from the perspective of promoting effective competition among commercial banks.