A Study Of Regional Effects Of Monetary Policy In China

During the 30 years of China's reform and opening up, monetary policy has become the major tool for government macro-economic control and played an important role in stabilizing prices and promoting economic growth. Because the level of economic development, industrial structure, financial structure, the degree of openness, market-oriented extent, etc of different regions in China are of great difference, monetary policy is likely to have significant asymmetric effects across different regions. If the formulation and implementation of monetary policy fail to take regional economic into consideration, it will widen the regional economic disparities and impact the coordinated development of regional economies. At present, the theoretical research framework of regional effects of monetary policy has not been constructed and the empirical studies are still limited. Therefore, it is necessary to study regional effects of monetary policy and propose the strategies of promoting coordinated development of regional economies.In this dissertation, we focus on regional effects of monetary policy and construct the theoretic framework for analyzing regional effects of monetary policy in China. The mechanisms of regional effects of monetary policy are analyzed in multiple perspectives. Regional differences caused by monetary policy are researched by using time-series techniques and empirical data. Reasons for regional effects of monetary policy in China are examined. At last, we propose the proper suggestions. The dissertation is divided into 7 chapters. Chapter 1 is the introduction. Chapter 2 is the literature review. In Chapter 3, the decision-making institution of monetary policy, the decision-making mechanism of monetary policy, and the historical evolution of monetary policy tools in China are introduced. The characteristics of monetary policy and the differences of regional economies are analyzed. In chapter 4, regional aggregate demand and aggregate supply (AD-AS) model, regional money multiplier model and regional monetary policy multiplier are analyzed theoretically. In chapter 5, we combine the corresponding theory of monetary policy with the regional economic data in China and analyze the specific mechanisms of regional effects of monetary policy in China in multiple perspectives. In chapter 6, on the basis of theoretic and mechanism analysis, the regional output effects and regional price effects of monetary policy are examined empirically. We also provide evidence on the reasons for regional effects of monetary policy. Chapter 7 concludes and proposes corresponding suggestions.The following conclusions can be drawn from the research of the dissertation:(1) the theoretic analyses show that the response of the eastern region to monetary policy actions is greater than the ones of less developed middle and western regions. This is reflected in the regional differences of AS curve slope, the distribution of monetary base, money multiplier and multiplier of monetary policy. (2) The analysis of mechanisms shows that the eastern region in China is more sensitive to expansive monetary policy, but different factors cause different effects in tight monetary policy. (3) The empirical examinations also provide evidence on the above findings that the regional effect of monetary policy of the eastern region is the greatest, the middle region ranks the second, the northeastern region ranks the third, and the western region ranks the last. The regional price effects of monetary policy of different regions are similar. Among the factors that cause the regional effects of monetary policy, firm structure variables, the structure of international balance of payment variable and the bank structure variable are significantly related to the size of a provincial output response to monetary policy.This dissertation contributes to the theoretic systemization, effect mechanism perspective comprehension and normative and novelty of empirical research. (1) In theory, AD-AS model, money multiplier and monetary policy multiplier are use to regional effect of monetary policy. On the basis of these models, regional AD-AS model, regional money multiplier and regional monetary policy multiplier are constructed. The theoretic analysis provides a standard theoretic framework. (2) In mechanism analysis, specific mechanisms by which monetary policy affects regional economies are analyzed in perspectives of tools of monetary policy, asset price fluctuations, regional economic structure differences and investment return differences, etc. It overcomes the analysis limitation in a single perspective. (3) In empirical study, regional output effects and regional price effects of monetary policy in China are researched in methodology of impulse response functions and variance decomposition from estimated vector error correction models. The impact of regional economic structure differences on regional effects is examined in methodologies of simple linear regression and variable relation scatter graphs.