Research On The Regional Asymmetric Effect Under Monetary Policy Shock And The Formation Mechanism

"What can monetary policy do and what can’t monetary policy do, whether monetary policy is effective or not" (Friedman,1968) has been one of the issues macroeconomists most concerned about. How to better grasp the efforts to control monetary policy, improve the effectiveness of monetary policy, not only about the government and monetary authorities could make a scientific decision-making, precise control, but also a more profound impact on macroeconomic stability and regional economic development and other important strategic objectives to achieve.Traditional macroeconomic theories hold that monetary policy, like other macroeconomic variables, is the overall concept of a total amount. So that the formulation and implementation of monetary policy are a process of total management, and the policy authorities should pay more attention to the macroeconomic and financial environment operation, without considering too specific microscopic details. The basic conclusion has become an important basis for the implementation of a unified monetary policy.In recent years, however, it is generally aware of the different economies in the same currency area, the economic effects under the impact of a unified monetary policy are quite different. On the one hand, different areas could make full use of its geographical characteristics, or take innovation by reform, which might turn the economic potential into economic advantages, resulting in differences in regional development. On the other hand, the process of conducting monetary policy is complex and tortuous, involving monetary authorities, financial markets, a large number of financial institutions, and ultimately affect the microstructure. The entire transmission channel smooth or not and the differences of conduction and microscopic aspects will have a significant impact on the final results, which lead to the regional asymmetric effect China is in a critical period of economic transition to realize the fundamental transformation of economic growth mode, especially after the economy entered a new norm, and the effect of monetary policy will be severely tested. How to use the theory of monetary policy to guide the macro management of money and credit, trying to avoid monetary policy tools to become regional development gap factor will be the key to build a moderately prosperous society, to promote regional economic coordination development and to eradicate poverty for China in "Thirteen Five" period.This paper followed basic philosophical analysis of "what", "why", "how" and studied regional asymmetric effects under monetary policy and the formation mechanism from three levels:literature review, theoretical analysis and empirical test. On the basis of domestic and foreign literature review, this paper used empirical analysis measurement tools such as VAR model, impulse response function to prove that regional asymmetric effect of monetary policy exists in China. Then on the basis of the conclusion, this paper studied the formation mechanism and reasons of regional asymmetric effects of monetary policy. To explore comprehensively, this article analyzed the formation mechanism of monetary policy area asymmetric effect from four perspectives:OCA Theory, the theory of monetary policy transmission mechanism, the total supply of the region’s total demand model theory, China’s monetary policy transmission, then formed relevant policy recommendations.This article had a total of nine chapters which could be divided into five parts.Part Ⅰ included Chapter 1 and Chapter 2. An introduction and literature review section of this article. Chapter 1 introduces the research background, research significance, research methods, research ideas and structure, research innovations and so on. Chapter 2 introduces the concepts related to this article, and the main research results home and abroad.Part Ⅱ also had only one chapter, that was Chapter 3. Chapter 3 was empirical tests of China’s monetary policy area asymmetric effect. In this paper, we use the vector auto regression model, impulse response function and variance decomposition analysis measurement tools, building the impact model of monetary policy (M2) on the regional economic output (real GDP) and the price level (GDP deflator). From the perspective of the whole region, we analyze three regions on the Regional Perspective; starting with intra-regional differences, we analyze the 31 provinces based on provincial perspective, and at last we reach the conclusions that the presence of China’s area asymmetric effect under monetary policy shock. Empirical results show the impact of monetary policy on the differences between the different provinces within the region is very significant, positive impact of monetary policy effective in promoting economic growth in the eastern region, and will not lead to higher price changes, the impact of monetary policy on the western regional output growth is lower than the eastern region, while the price increase was higher than the eastern region.Part Ⅲ included four chapters, they are Chapter 5,6,7,8. this Part analyzes the formation mechanism. Mainly from the OCA theory, the theory of monetary policy transmission mechanism, the AD-AS model theory, China’s monetary policy transmission particularity four analyzes the formation mechanism of monetary policy area asymmetric effects. Chapter 4 using the standard free flow of labor and other factors of production, economic openness standards, product diversification standards, financial integration standards four indicators of optimal currency area constitutes the proposition that a statistical study. Chapter 5 monetary policy transmission mechanism based on the theory analysis of the basic situation of China’s monetary policy transmission mechanism. We analyze the regional impact of monetary policy on asymmetric effect and take the empirical test on the base of the core meaning of the transmission mechanism of regional differences in the level of financial development, industrial structure and firm size and its structure,. Chapter 6 based on the framework of the regional AD-AS model, we discusse the slope and regional monetary policy multiplier regional aggregate supply curve, explain the impact of monetary policy on the regional economic structure. Chapter 7 of regional differences particularity of local government and the transmission mechanism of monetary policy tools to practice analysis, found that local governments in different conditions of regional financial intervention, especially by means of bank loans and real estate prices channel channels intervene and rediscount business, deposit interest rates, deposit reserve ratio, credit policies and lending policies and other monetary policy tools will lead to regional asymmetric effects of monetary policy.Part Ⅳ was Chapter 8 which studied the relevant policy recommendations. From the formation mechanism of monetary policy area asymmetric effect, we put forward in accordance with the general requirements of overall regional coordinated development, and promote the coordinated development of regional economy; full leverage multiplier effect on the economy of modern finance, and promote the coordinated development of the regional financial system; maintaining monetary policy under the premise of unity, the implementation of part of the monetary policy tools relevant policy recommendations of the regional differentiation operate within a certain range.Part Ⅴ (Chapter 9) was the conclusion of this article, we describe the basic conclusions, and insufficient research prospects.