Rsearch On The Regional Asymmetric Effects Of Monetary Policy In China

The regional asymmetric effects of monetary policy is separated from the connotation on asymmetry of the monetary policy. Scott (1955) made the earliest study of the regional effects of monetary policy. Cover (1992) in their published paper,"The asymmetric effects on positive and negative currency impact " put forward to the concept of asymmetric effects of monetary policy, followed by generally accepted theoretical circles. With the deepening of theoretical studies of monetary policy, the content and forms on the asymmetric effects of monetary policy were gradually enriched. The regional asymmetric effects of monetary policy are mainly shown by the inconsistency in time and space dimensions, specific sub-divided into three aspects. First, the asymmetric effect of monetary policy (asymmetric effect):the stimulation from expansionary monetary policy on the economy during the economy recession phase is less than the deceleration by tightening of monetary policy on the economy during economic overheating stage; Second, time inconsistency on the effect of monetary policy (time inconsistency):during the dynamic game between the government and the public, public behavior has changed policy environment. So the optimal policy enacted early by government may lose optimality in the implementation phase.In order to avoid losses, the government does not really implement the original policy, but to take the discretionary policy, re-choosing the best policy; Third, the regional effects of monetary policy (regional effects), or called by space inconsistency in corresponds to time Inconsistency, mainly shows that the same monetary policy will produce the different effects in different economic regions. The first two aspects in the study of these three aspects have been on relatively long time both in the domestic and international research.The third aspect of the study formally began in the1970s in some foreign countries. Some success has been gotten in this studying area in recent years, but this is the beginning. The comment of this article is mainly carried out for the third aspect---the regional asymmetric effects of monetary policy.With the further deepening of China’s Reform and opening up and of the process of marketization, the regional characteristics of China’s economy is increasingly evident.Both from the perspective of the financial system, industrial structure point of view, and the comprehensive point of view, China’s regional economy is more suitable to be divided into the eastern region, the central region, the western region and the northeastern region. The theme of this paper is to explore the most fundamental reason for producing the regional asymmetric effects of monetary policy from the regional aggregate demand and aggregate supply point of view. In view of the theme of this paper, by comparing the four regions’economic and financial situation, the large differences in regional economies can be found in regional economies in China. In this situiation, will China’s implementation of a unified monetary policy have the regional asymmetric effects? and what is the resean for the generation of regional asymmetric effects?In views of these issues, this article made its comprehensive analysis from the macro-level, gradually penetrating to the micro-level. Firstly, China’s monetary policy objectives and the transmission mechanism are reviewed.And then, on the one hand, based on regional demand factors, respectively from the perspective of consumption effects and investment effects,this paper made analysis of the realistic basis of regional asymmetric effects of monetary policy; On the other hand, based on the theory of short-term aggregate supply curve, from the perspective of differences caused by the regional aggregate supply curve, the regional asymmetric effects of monetary policy were also analyzed. From these two aspects of analysis, the conclusions are:(1) In views of the consumption effect, by the analysis and collation from regional data we found that:the proportion of the respective total demand accounting for GDP and a statistical standard deviation of the proportion are significantly different; The average propensity to consume of the four regional residents are quite different.Both town average propensity to consume and rural residents’propensity to consume, the west region and northeast region are higher than the eastern region and central region, generally verifying that the defference between the average propensity to consume is caused by the income deference; there are differences among four regions’marginal propensity to consume, but this difference has been narrowing. (2) In views of investment effect, through preliminary analysis of the three channels we made such conclusion:In the investment effect, investment sensitivity to interest rates is not high.The investment effect by interest rate channel is not obvious; China’s capital market is in a stage of development. In the first phase of asset prices channel, the effect on the impact of monetary policy on asset prices has already been shown. However in the second phase of asset prices channel, the effect on asset price impact on investment(the wealth effect of asset prices) exists, but relatively weak. So the investment effect of asset price channel is weak; From the point of view of credit channel, wether in the bank deposit distribution and loan distribution, or the distribution of non-bank financial institutions in the industry distribution, the conduction of monetary policy in the eastern region is relatively efficient. However, in the enterprise scale, business ownership, banks’relying on deposit and enterprices’ relying on bank loan, the conduction of monetary policy in the west region is more conducive. Therefore, the regional investment effects on monetary policy is on the more obvious characteristics of the regional asymmetry. Therefore, by the comparison of these three channels, the investment effects on regional asymmetry is more prominent in the credit transmission channel.(3) In views of different factors that cause aggregate supply curve’difference, seen from the analysis of theoretical, the level position and slope conditions of the aggregate supply curve have a direct relationship with inflation expectations and output volatility. Inflation expectations and output volatility are directly subject to the constraints of price, wage rigidity, the difference of the expectation, labor productivity, foreign trade shocks, technical differences in resource endowments, institutional characteristics and so on. Therefore, we can make analysis on the difference of aggregate supply curve from the following aspects:the difference from the expected price formation, differences in regional labor productivity, differences on regional institutional and resource endowments.Therefore, whether in terms of regional aggregate demand (the consumption effect, the investment effect) point of view, or from the perspective of the total supply (regional aggregate supply curve), it is obvious that the regional asymmetric effects of monetary policy exists in our country. Of course, these conclusions is mainly drawn by quantitative methods and need using econometrics methods to validate. This paper mainly involves the measurement of VAR (Vector Autoregression Model), pool model, the HP filter and the OLS (ordinary least squares) method. By these measurement methods, the further conclusions validate the results of preliminary quantitative analysis.The further conclusions are:(1) In terms of the regional asymmetry on the investment effect of monetary policy, in the first phase of the credit transmission channel, the money supply impact on new credit loan in each region has an obvious asymmetry. Monetary policy’effect on the new credit in eastern regions is the most obvious. The effect on the central regions and western regions is the second. The effect on the northeast region is minimal; In the second phase of the credit transmission channel, that is the stage of the new credit loan impact on regional consumption, the pulling effect of the eastern part of the new credit on investment is far stronger than the central, western and northeastern regions.(2) In terms of the asymmetry on the consuming effect of monetary policy, in the first phase of monetary policy transmission, that is, the stage of the impact money supply on regional house prices, there are significant regional asymmetry on the impact of monetary policy on house prices. The impulse response function of the regional house prices also showed that:compared to the west and northeast, the duration of the impact of monetary policy on the eastern and central house prices is more persistent; In the second phase of the monetary policy transmission, that is, the stage of the impact of regional house prices on consumption, there are clear regional asymmetry in the impact of house prices on consumption. Four regions of the panel data model also has fully proved that the eastern consumption by the impact of house prices significantly higher than the other three regions.(3) In terms of differences among the aggregate supply curves, due to the reciprocal of the " β "coefficient in the regression equation is short-term aggregate supply curve slope in the classic analysis of the monetary policy effect in the"P-Y" coordinate plane. The short-term aggregate supply slopes in various provinces and cities is positive, then the short-term total supply curves oblique from the bottom to the top. And according to the size of the regression equation coefficients some conclusions can be drawn:The slopes both in eastern and northeastern regions are the smaller than other regions. So their curves are relatively gentle; The short-term aggregate supply slopes in the central and western regions are relative bigger. So their curves are relatively steep. Its economic application is that:given a unit in price changes from positive impact of monetary policy, the changes in output in the eastern and northeastern provinces and cities is larger than the ones in output in the western provinces and cities. Thus the regional asymmetric effects of monetary policy is also shown by differences in regional short-term aggregate supply curve.Through the quantitative and qualitative analysis, we have shown "why the regional asymmetric effects of monetary policy exisits in China?" But how to alleviate the regional asymmetric effects of monetary policy? According to our country’s actual conditions, this paper presents the relevant policy recommendations.