Research On Asymmetric Effects Of Chinese Monetary Policy

At present, the shock of the global financial crisis has yet to end, and China is in the crucial period of reform and economic structural adjustment. In the face of such challenges from both at home and abroad, People's Bank of China (PBC) has actively used kinds of monetary policy tools to sustain steady economic growth in China. In order to take better advantage of the role of monetary policy, the impact of monetary policy on real output and inflation should be researched more comprehensively and systematically, and asymmetric effect of monetary policy is one of the significant aspects. Research results from home and abroad show that there is not a linear relationship between monetary policy and the real economy, but it often shows the characteristics of asymmetric. This asymmetric exists in some different aspects, and the research of this field has a fatal significance for guaranteeing the success of monetary policy of PBC and the China's economic and social development.In the1930s, Keynes discovered that expansionary monetary policy made no contribution to increase the level of real output while it was valid at other times, and from then, economists began to analysis the performance characteristics and forming reasons of various asymmetry of monetary policy in theory from different perspectives. Cover(1992) introduced empirical approach into the study of asymmetry of monetary policy, and after that, this field has come to be a hot research area in economics. To date, a relatively complete theoretical framework has been established in this research field. Detailed analysis has been made on asymmetry of monetary policy by foreign scholars since Cover, and fruitful scholarly achievements have been obtained in the empirical and theoretical study.In contrast, related research started rather late in in Chinese academia, and there is still much room to improve. The research on asymmetry of monetary policy has also important implications for PBC, beacause it can improve the pertinence and effectiveness of monetary policy operation. Therefore, based on combination of theory with China's reality, this thesis would study the asymmetry of monetary policy in China in detail, in order to provide reasonable suggestions for PBC to improve its monetary policy practice.Based on the facts of China's current economic development and monetary policy operation practice by central bank, this thesis uses a variety of empirical methods to test asymmetric effect of monetary policy in manifold forms, and makes deep and comprehensive interpretation of the formation mechanism. There are two main study directions in this thesis, longitudinal asymmetry effect and transversal asymmetry effect. The former includes the asymmetrical influence effect of monetary supply shock or interest rate shock in different directions, and asymmetrical influence effect of monetary policy in different phase of business cycle. The later includes the asymmetrical influence effect of unified monetary policy made by PBC among state-owned enterprises and private enterprises, the three main industries and four economic regions.This thesis is composed of nine sections, and it is structured as follows. The first chapter is the introduction, which describes the background, aim, significance and innovative points of the issue. The second chapter is literature review on asymmetry effect of monetary policy, in this part, firstly it looks back the antilogy origin and evolution of this theory, then it reviews the relative literature on functional mechanism and influence channel of asymmetry, finally it summarizes and compares the empirical results from domestic and international scholars to provide enlightenment for the following research in this thesis. In the third chapter, fiststly it provides an overview of the development of non-neutrality of money policy, then based on monthly data from January1998to December2013, it examines the efficiency of Chinese monetary policy though Morlet wavelet transform analysis in orde to lay the theoretical foundations for the following research in this thesis, and proves that Ml is superior to M2as the index of money supply. In the fourth chapter, by using of HP filter methd, positive and negative monetary supply shock or market interest shock,, which from an expansionary and tight monetary supply policy or interest rate polcy, are respectively separated, and with the aid of impulse response function based on a VAR model, it analyzes the asymmetric effect of positive and negative monetary policy shock on actual output and inflation, and explains the formation mechanism respectively. In the fifth chapter, after separating business cycle into different stages in the process of Chinese economic development, method of bootstrap rolling window is applied to verify that monetary polcy has different influence on real economy in the different phases of business cycle, and explanations are provided for the cause of this form of asymmetric effect from the perspective of public mood, mental expectation and "monetary reservoir effect" in Chinses real estate market and stock market. In the sixth chapter, by means of error correction model (ECM), it affirms the existence of asymmetry effect of monetary policy between state-owned enterprises and private enterprises which represent two most typical enterprises of different ownership in China, and reasons are stated from the differences in enterprise scale, product's pricing and credit discrimination. In the seventh chapter, through impulse response function based on a VAR model, the different effcet of monetary credit on growth rate of real output among three industries is confirmed, and then it is interpreted from some point of view, such as the diversity of financing channels, financing facilitations and degree of financial friction. In the eighth chapter, after separating China into four different economic area, by using a time-varying parameter model which is based on state space, the difference in effect of monetary supply shock on output among different areas in China, and explanations are provided for the cause from the perspective of the difference among four areas in level of economic development, financial market development, activity in private lending market, and the real estate market development. The ninth chapter is conclusion of the whole thesis, and some suggestions are provided for PBC to improve its monetary policy practice and solve these problems on different types of asymmetric effect of monetary policy to guarantee the healthy and harmonious development of China's economy.Therefore, the research on asymmetric effect of Chinese monetary policy has an important theoretical and practical significance, it will contribute to expand research areas of monetary economics in China and improve the ability of monetary policy operation by PBC.