The Time-varying Effects Of Credit Transmission Of China's Monetary Policy

According to the central bank,2017's renminbi loans to the real economy accounted for 71.2%of the social financing scale,an increase of 1.4%in the same period.As far as the stock of financing is concerned,the ratio of RMB loans is close to 70%.The proportion of direct financing channels is still low,only accounted for 14%.In the process of making monetary policy,we should fully consider the effectiveness of all kinds of conduction channels,especially for our country,where the indirect financing mode is the main body,the smooth or not of the credit conduction channel plays a vital role in the monetary policy.In the period after the reform and opening-up,the central bank has repeatedly opened the credit control tools to carry out macro control and successfully completed the policy goal of "guarantee growth,stabilize prices and promote employment".But as China's economy enters the"new normal" situation,the interest rate plays an increasingly important role in the macro-control,whether the credit conduction channel still plays an important role,whether the time-varying effect has changed greatly?To answer these questions,it is of great practical significance for us to further clarify the monetary policy,improve the regulatory framework of monetary policy,and play a better role in regulating the monetary policy.This paper first looks back on the relevant theories of credit transmission channels,and illustrates previous studies of time-varying effect of monetary policy credit channels.On the above basis,the paper analyzes the current conditions of credit channel in China and the factors that lead to the time-varying effect of credit channel.Because of the non-substitutability of credit assets and the dependence of borrowers on credit,credit channels are able to find their place in China for a long time,whereas with the change of social financing structure,the upgrading of regulatory means and the structural change of foreign exchange account,the effect of credit channels has obviously changed a lot.Then,we extend the model to TVP-FAVAR model by bringing in dynamic factors and time-varying parameters on the basis of traditional VAR model.Based on the TVP-FAVAR model,using 150 sets of macro monthly data from 2003 to 2017,a macro factor model of monetary policy in China is established,the credit growth rate is used as an intermediate target of monetary policy to simulate the model,so as to estimate and analyze the dynamic regulation effect of credit transmission channel of monetary policy.The empirical results show that the transmission of monetary policy credit channels in China has obvious time-varying characteristics.The impact of credit shocks on output and inflation is significantly different at different times.During the recession,credit shock has a significant effect on output,but has a weak effect on inflation.In the period of high economic growth,the impact on output is weaker than that on inflation.At the same time,with the change of economic structure,the transmission effectiveness of credit channels is gradually weakening.In order to further compare the effectiveness of credit channel,monetary channel and interest rate channel,this paper studies the effectiveness of monetary channel and interest rate channel with M2 and inter-bank lending rate as policy variables.The results show that the effectiveness of monetary channel is gradually decreasing,while the effectiveness of interest rate channel is gradually increasing.The empirical results show that the regulation of interest rate transmission is optimal during the sample period,because interest rate instruments have the strongest constraint on the macro economy.The constraint on credit transmission is the lowest among the three major transmission channels.However,the path of interest rate transmission is not smooth,which limits the further function of the interest rate instrument.Further,we can see that in the process of the transition of the monetary policy framework,the effectiveness of the three major transmission channels of monetary policy has declined.This shows that in the context of the transformation of monetary policy instruments,the effectiveness of original dominant monetary policy transmission channels has been declining.It still takes some time for the new conduction channels to play a role.This result makes the effectiveness of monetary policy appear a certain vacuum period,which brings new challenges to our macro-control work.This shows that in the future monetary policy formulation,we should pay more attention to the role of credit channels,enhance the smoothness of credit channel transmission,while reducing quantitative control which putting large sums of money into circulation and embracing more use of open market operations to iron out economic fluctuations through price-based tools.