Small Northwest Regional Differences Of Economic Development And Monetary Policy Effect Empirical Research

Promoting coordinated regional development is the strategic task of reform and opening up as well as socialist modernization, and also a requirement for building a well-off and harmonious society. It is not only an economic issue but a political one to coordinate and narrow the gap in regional development. Realizing scientific, harmonious and sustainable development of a region is one of the major strategies, which could increase China's overall national strength, maintain national unity and social stability, and keep sustained and healthy economic social development.Since the reform and opening up, especially the Western Development Program, the western region has made rapid progress. But the gap of development of the economic and social is expanding between the eastern region and western region, regional development is facing arduous task. Under the support of preferential policies, Shanxi, Gansu, Ningxia, Qinghai, Xinjiang, the economic and social development of the new five northwestern provinces has made gratifying finish. At the same time, the capacity of economic development and the economic growth had a significant gap between the five provinces, that is the development of Gansu, Ningxia, Qinghai has fallen behind in Shanxi and Xinjiang. Thus, these form a new regional economic phenomenon of the western development-a small Northwest region (Gansu, Ningxia, Qinghai) seriously lag in economic development.Regional differences in monetary policy effects have an impact on the regional economic development. As the economic and financial development, economic and industrial structure of different regions varies, the monetary policy transmission mechanism diverges, a unified monetary policy will inevitably result discrepancies in the regional economic and social development. In the long run, the monetary policy ignoring regional differences will not only aggravate the uneven regional resource allocation, but also exacerbate the uncoordinated regional development. Economic growth, price stability, full employment and balance of payments are the four objectives of monetary policy, so is coordinated regional economic development. In this paper, VAR model and Panal model shows that the regional effects of monetary policy in China differ in the eight major economic regions. Developed regions are relatively more responsive to the monetary impact, while less developed regions are less responsive; the currency impact on developed regions are greater than that on less developed regions.Monetary policy effects under different economic cycles are compared in this paper to show that expansionary monetary policy will increase the regional economic development gaps, while tightening monetary policy would reduce regional economic disparities. In economic recession, the economic recovery cycle of less developed regions will be longer than that of developed regions if expansionary monetary policy is applied. In economic overheating, tightening monetary policy will be more effective in developed regions than in less developed regions. In the respect of the space of economic development, China's monetary policy is implemented without exceptions, which lacks flexibility, and exacerbates the imbalance in regional economic development to a certain extent.The case studies of Sub-northwest region demonstrate the effects of monetary policy regulation on industry of the three provinces in Sub-northwest region diverge. They have less impact on fixed assets investment; limited impact on real estate investment but significant impact on real estate demand; no significant effect on the economic structure but great impact on deposit and loan structure. In coping with the international financial crisis, the economic recovery of Sub-northwest region is more volatile than that of the coastal developed areas.Based on that monetary policy effect disparities in different regions, this paper puts forward proposals on how to rich the content of distinct control strategy, strengthen the coordination between fiscal policy and monetary policy, develop a sound financial system in Sub-northwest region, accelerate marketization in Sub-northwest region and enhance the economic viability of Sub-northwest region, so as to speed up economic development in Sub-northwest region.