Research On The Transmission Effect Of China’s Monetary Policy Credit Channel

The macro economic and financial environment of monetary policy operation is directly related to the transmission effect of credit channel of monetary policy. In the past ten years, China’s economic and financial environment has changed a lot, mainly in the improvement of China’s banking management and optimization of bank’s asset-liability structure; the market share of joint-stock banks has rising much more, a large number of city commercial banks, rural commercial banks and other banking institutions emerge like bamboo shoots after a spring rain, the market structure of bank industry become more and more dispersed, competition also has become increasingly fierce; the proportion of traditional bank credit financing to total social financing is declining, the ratio of new financing mode is greatly improved, social financing structure has begun to show the diversification trend of development. Because of China’s financial system is bank based financial system, therefor, the monetary policy transmission is fundamentally determined by the credit channel. Thus, when great changes have taken place in the economic and financial background, whether the transmission effect of credit channel will be affected, if affected, it is influenced by what factors, what kind of and what are the mechansims. This paper mainly carries on research from the micro, meso and macro changes in the structure of three perspectives.In this paper, the writing is divided into six chapters, the main contents of each chapter are as follows:The first chapter is the literature review, mainly from the theory origin, theoretical model, empirical method and research perspective of the transmission effect of credit channel.The second chapter is theoretical analysis and empirical analysis for the existence and transmission effect of credit channel in China, in the theoretical analysis, mainly from the CC-LM model and the real existence conditions of credit channel in China. In the empirical analysis, partial correlation coefficient, cointegration test, Granger causality test, impulse response, variance decomposition and other empirical technologies on the transmission effect of credit channel is used. Research results show that the significance of correlation coefficient between the monetary policy’s tool variables and bank credit is higher than the correlation coefficient between monetary policy’s tool variables and other intermediate target variables; the effect of credit on economic growth and CPI is more strong and durable than money supply and the stock market. Thus, it shows the important role of bank credit in the transmission process of monetary policy in China. At the end of this chapter, we put forward the starting point of this paper,that is,bank’s assets and liabilities structure—— micro perspective.banking market structure——meso perspective,social financing structure——macro perspective.The third chapter studies the transmission effect of the credit channel from the angle of bank’s assets and liabilities structure. Firstly, changes in China’s bank structure of assets and liabilities are analyzed, on this basis, we carry out empirical study by structuring bank assets and liabilities theory model of transmission effect of credit channel. The empirical study shows that the coefficient of interaction term between the ratio of cash in the bank, securities investment to credit asset and monetary policy variable Ml is negative, the coefficient of interaction term between the ratio of non-deposit liabilities to total liabilities and monetary policy variable Ml is also negative. Therefore, it indicates that the greater the ratio of cash in the bank, securities investment to credit asset is, the larger proportion of non-deposit liabilities to total liabilities is, the weaker the impact of monetary policy on bank credit and transmission effect of credit channel will become. In the fourth section, we put forword two mechanisms of the empirical results which support the empirical result. One is the substitution effect of assets and liabilities; the other is that the structure of assets and liabilities has "signal indication" function, it can convey the information to the market about bank management, shock resistance ability etc. Therefore, good, reasonable bank’s assets and liabilities can offset the adverse effects of the shock of monetary policy, and it can weaken the transmission effect of monetary policy credit channel.The fourth chapter studies the transmission effect of credit channel from the angle of the market structure of the banking industry. We first review the evolution course of China’s banking industry market structure, by using the quantitative analysis of changes in market structure of China’s banking industry, and constructing the Cournot model which introduces the variable of market structure, we analyse theoretically the impact of changes in banking market structure on the transmission effects of credit channel. The empirical results show that the competitive banking market structure is beneficial to improving the transmission effect of the monetary policy credit channel. Furthmore, the use of different banking market structure indicators and the system GMM estimation on the extensional dynamic empirical model ensure the robustness of the empirical results. Bank ownership, size, liquidity and capital adequacy ratio are the most important mechanisms that lead to the market structure influences the transmission effect of monetary policy credit channel.The fifth chapter studies the transmission effect of the credit channel from the perspective of social financing structure. Firstly, we use qualitative and quantity analysis on the changes of China’s social financing structure in recent years, on the basis of this, we also analyse how corporate financing decisions is influenced by monetary policy through constructing a general equilibrium model. And we carries on an empirical analysis of the financing structure’s effect on transimission effect of the monetary policy credit channel by using panel data of several provinces The empirical results show that the higher the credit financing ratio is, the stronger the transmission effect of credit channel of monetary policy will become. Considering the robustness of the results, we also carry on panal regression by using the ratio of the stock financing increments to social financing and the grouped samples according to the time period, the regression results is consistent with these of the ratio of credit financing increments to social financing. Asymmetric adjustment of bank credit to the large and small enterprises in crunch timc, differences in regional distribution of alternative financing, regional distribution of enterprise characteristics and regional distribution of opening degree are important mediated mechanisms which lead to social financing structure affects transmission effect of the credit channel.The last chapter of this paper summarizes the conclusion, and points out the policy recommendations contained in the conclusion.