Study On The Asymmetric Regional Effects Of Monetary Policy In China

Monetary policy is an important macroeconomic regulation method,by which themacroeconomy operation is regulated on the total amount. The central bank formulatand implement the unified monetary policy based on the operation of themacroeconomy as a whole. The unified control is premise with the homogeneity ofregional economic development. With the unbalanced regional economic development,asymmetric regional effect of monetary policy arose that will lower the overall effectof monetary policy and widen the gap of regional economic development. It isnecessary to study on the existence, the measurement and the origin of asymmetricregional effect of monetary policy in China.In this dissertation, Based on the marketization index and synchrony of businesscycle31provinces are divided into three regions by system cluster and K-Meancluster: developed eastern region, less developed middle region and least developedweastern region.Connotation of relevant concepts of asymmetric regional effect ofmonetary policy is defined. Then an simple discussion of three basic theories is made:theory of effectiveness of monetary policy, theory of Optimum Currency Area andtheory of transmission mechanism of monetary policy, which is a precondition for thestudy, tentative judgment standards and the cause analyse base respectively.Afte the review of the central bank system and the practice of unified monetarypolicy in China, the difference of regional economic and financial development isdiscussed as the realistic constraint of unified monetary policy. China is still not anoptimum currency, according which a tentative judgment is made that asymmetricregional effect of monetary policy exists in China. Taking annual data of1985-2010of the three region as sample, this dissertation takes the test of asymmetric regionaleffect of monetary policy in China by stability test, Granger Causality test, VAR andSVAR model, Impulse Response Function,Variance Decomposition.It shows that theoutput effect in eastern region is larger than that of middle and western region,whilethe price effect in eastern region is smaller than that of middle and western region.Taking quarterly data of2004.01-2011.03of the three region as sample, theasymmetric regional effect of monetary policy in China is test again by stability test,Granger Causality test, VAR and SVAR model, Impulse Response Function,which isbasically consistent to the earlier one. Finally, taking annual data of1985-2010of31provinces as sample, test of asymmetric provincial effect of monetary policy in China by stability test, VAR and SVAR model, Impulse Response Function is made.It showsthe same conclusions.The origin of asymmetric regional effect of monetary policy in China isresearched from economic subjects of monetary policy transmission. Operation ofmonetary policy instruments by central bank has the asymmetric regional effect,Taking quarterly data of2004.01-2011.03of Base Money and regional money supplyas sample, the asymmetric regional effect is test by stability test, VAR model, ImpulseResponse Function and State Space model. The money supply in eastern region ismore than that in middle and western region. Also, financial market, financialinstitution and enterprise in eastern region are developing in a higher level than thosein middle and western region. The level of income and consumption expenditure ofeastern households is higher than that of middle and western households.All of theabove say that monetary policy transmission in eastern region is smoother than middleand western region.The empirical test base on provincial cross-sectional data confirmit.In view of that,in order to diminish the asymmetry of regional effect of monetarypolicy in China some corresponding suggestions are put forward.Government shouldhas a scientific orientation in achieving balanced economic and financial developmentamong different regions. Regional difference should be taken into consideration whenmonetary policy is designed and implemented to fufil the function of monetary policyinstrument on structural adjustment.Let trans-provincial branches of central bank toplay a more important role in making and implementing monetary policy. The systemof financial institution and financial market in Midwest shouid be strengthened andperfected. Intensify the reform of enterprises and increase the income of residents inmidwestern region.With the coordination of monetary policy, fiscal policy, industrypolicy,foreign trade policy and income distribution policy, the economic developmentof Midwest region should be accelerated and the harmonious development of regionaleconomy should be realized. china will be established to be an optimum currencyarea.There are71figures,87tables and224references.