An Analysis On The Development Of China Money Market And The Effect Of Monetary Policy Transmission

The objective that the monetary authorities of all countries in the world pursue is to implement monetary policy effectively. Therefore, the channels of monetary transmission, i.e., through what channels monetary policy act on real variables, has been hot topic that scholars research on and inquire into.As for China, our financial system reform is actually a process that state delegates power to microeconomic subjects such as financial organization and non-financial organization. And the power change of microeconomic subjects provides them power basis to react to monetary policy, with result of specific characteristics of China's indirect monetary transmission which uses monetary market as intermediary. Through analyzing transactions of microeconomic subjects in monetary market, this paper clarifies that monetary market formed in government-oriented financial reform has no good performance in monetary transmission. Through analysis, the paper points out that the power change of microeconomic subjects provides essential condition for them to obtain extra-system benefits, and that in process of property rights reform, obscure property right due to incomplete reform provides full condition for them to participate transactions in monetary market. On basis of this, we try to give suggestions for China's monetary market development and help it improve efficiency of monetary transmission. This paper includes 4 parts:In part 1, we briefly introduce theories on money market and monetary policy transmission. Then we emphasize that microeconomic subjects in money market take an important part in monetary policy transmission.In part 2, we express the opinion that China's monetary market is result of concession of some interest subjects in institution change. However, there's deviation in traditional idea about the position of monetary market. So we first make new understanding of the function of monetary market, which forms the theoretical base for analysis on performance of monetary market.In part 3, we research on that microeconomic subjects seek extra-systematic benefitsunder circumstance of the power change, results in low efficiency of monetary marketin monetary transmission. Since transactions of microeconomic subjects provide asubstitute channel of profit-obtaining for monetary market, the channel transformingsavings into investments is affected, and then the monetary policy transmittedmonetary market is inefficient.In part 4, we test the above theoretical analysis with empirical studies.In part 5, based on theoretical and empirical analysis, we get the conclusion of thispaper: Property right reform of financial organizations is the key to increaseefficiency of monetary transmission. In addition, we give some suggestions of thisreform.