The Asymmetry Of The Effects Of Monetary Policy In China Industry: A Nonlinear Perspective

The quite flexible monetary policy, being the most influential and penetrative policy in a market economy, is regarded as an important economic policy by various governments at present. Together with fiscal policy, monetary policy is applied to help control the risks caused by excessive economic fluctuation and promote steady and rapid economic development. As one of the flexible and deliberate macroeconomic policies, fiscal policy functions in a relatively unambiguous way while monetary policy's impact on industries is hard to predict. Therefore, to make flexible and deliberate macroeconomic policies, the first issue we should consider is to study the unevenness of industrial effect induced by monetary policy.Using a non-linear framework for the first time, this paper gives a full explanation for the forming mechanism of asymmetries in monetary policy industry which is defined as a non-linear threshold of the asymmetry in monetary policy industry. It basically includes the following aspects:First, the forming mechanism mentioned above should follow a process which goes from macroscopic to microscopic, namely monetary policy affects the output of the enterprise through specific transmission channels at first, then the changes of the output affects the whole industry, thus forming the industrial asymmetry of monetary policy. Second, monetary policy itself has the characteristic of nonlinear threshold and this characteristic causes the asymmetry of monetary policy. Third, the transmission channels of monetary policy also have the same feature, so the effects of the channels are asymmetrical. Fourth, different financial structures reflect the monetary policy in a manner of nonlinear threshold, that's why the same policy can exert different influence on different enterprises, namely the feature of asymmetry. Once this kind of asymmetry is reflected in the enterprise level, the asymmetry of industry will come into being.We put forward three hypotheses to testify the industrial asymmetry of monetary policy. First, the monetary policy of our country is asymmetrical; second, the transmission channels of monetary policy in China are asymmetrical; third, the influence caused by the monetary policy of our country is asymmetrical.First of all we prove that the monetary policy of our country is asymmetrical, the study shows that for the threshold of the proxy index of monetary policy and the variable of currency supply (M2), c=501385.57, which means if the total monthly currency supply is less than 501385.57, it is a tight monetary policy, if it is larger than the figure, it is an easy monetary policy, our country's monetary policy shifts quickly between the two. From 1998 to 2008, the monetary policy was tight on the whole, since January 2009; it has been on an expansion state. The tight policy lasted longer and the tightening curve was sharper than the expanding period, which exactly shows monetary policy, is asymmetrical.Then we prove the asymmetry of the transmission channel, not only the four transmission channels of our country's monetary policy exert asymmetrical affects but also the transmitting process of the channels. For the credit channel, when the previous increasing speed of loans is more than 0.075, the model will change into a nonlinear one, then the variation of loans influenced by the alteration of GNP consists of both the linear part and the nonlinear part. That is to say the influence coefficient of the loan level during the previous period toward the current loans is-2.6799, the influence coefficient of the increasing rate of GNP toward the current loans is-37.96. The influence coefficient of the current GNP increasing rate toward the current loans is-6.498(only including the nonlinear part for the linear part is not notable). During the former three phases of the credit channel the interest rate showed a quick decline, when ABIORt₃< 0.0476, the interest rate of the former three phases changes 1%, the current CPI changes 2.822%, the CPI changes 1% for the previous phase, and the current CPI changes-4.7442%. When the interest rate of the former three phases raises fast and ABIORt-3> 1.41896, the interest rate changes 1%, the current CPI changes 2.822%, the CPI of the previous phase changes 1%, the current CPI changes-4.7442%. In the asset prices channels, the CPI fell back sharply during the former three phases, whenACPIt-3<-0.0299, the current SSI changes 1%, the current CPI changes 2.822%.At last, we prove the industrial effect of the country's monetary policy is asymmetrical. We use the PSTR to research the threshold feature of six financial indicators of 986 listed companies from the first quarter of 2002 to the last quarter of 2008. A Dual threshold panel model is suitable for studying the threshold effect on the farming, forestry, animal husbandry; fishery, construction industry and cultural industry exerted by monetary policy, while for real estate, manufacturing and mining industry, and single-threshold model should be used. The two thresholds should be used for the farming, forestry, animal husbandry and fishery.The panel threshold empirical results of industries like agriculture, animal husbandry and fishery demonstrates that liquidity is directly proportional to output. When the inventory level is relatively low, capital structure will have a positive effect on output. However, when it increases to a certain extent, capital structure will have a negative effect on the output. Through the panel threshold empirical results of architecture industry, we can draw a conclusion that when the liquidity is fixed, the inventory level is proportional to output. That is to say, the elevation in inventory level will reduce the impact of the increasing prices in means of production. Meanwhile, if the inventory level stays unchanged, liquidity is also proportional to output. In other words, increase in liquidity will greatly activate the cash flow and improve output. Then through the investigation of real estate industry, we can see that when liquidity is still, holding room for sale will obviously lead to the sky-rocketing of housing price, and finally will be proportional to output. Similarly, when the inventory level is fixed, liquidity will be a vigorous power to expand the industry and have a positive effect.According to the results of the panel threshold for cultural industry,we can find that when the product is less popular, the behaviors of any debt management will have negative effects on the output; however, if the product is much more popular, the behaviors of any debt management would have positive effects on the output. The panel threshold empirical results of industries like manufacturing industry, which requires high liquidity, the improvement of liquidity will increase the output. When the inventory is less than certain level that indicating the products are short of demand, then blind expansion investment implying the capital structure rises will have negative impact on the output. From the empirical results of the panel threshold in the extractive industry, when the inventory is much lower, the capital structure will have positive impact on the output; as the increase of the inventory, the changing capital structure will have negative impact on the output.From the perspective of nonlinear, investigating the asymmetric monetary policy would overcome the current bottleneck because the asymmetric monetary policy is a nonlinear issue and the previous studies have carried out under the framework of linear. Therefore, the perspective of non-linear can return the nature of the problem.