Research Of The Impact Of Economic Policy Uncertainty On The Effectiveness Of Targeted Rrr Cuts Policy

At present,the economic development of China is in a new normal period.The prominent economic structural contradictions and the great downward pressure on the economy have become the two major issues that the macro-regulatory departments need to deal with urgently."Structural adjustment" is an important support for "stable growth",so "structural adjustment" has been raised to an equally important level as "stable growth".However,it seems difficult for traditional policies to balance the goals of “structure adjustment” and “stable growth”.Under this premise,since April 2014,the People’s Bank of China has launched multiple rounds of targeted RRR cuts policy.It hopes to use its structural adjustment function to encourage more credit funds to flow into small areas such as small and micro enterprises and the three areas of agriculture,agriculture,rural areas and agriculture.In order to achieve the goals of "stable growth" and "structure adjustment".However,existing research shows that although the targeted RRR cuts policy has exerted its policy effects,its implementation effect may not be stable and does not meet the policy expectations;the effectiveness of the targeted RRR cuts policy is affected by many factors.Therefore,on the basis of previous related research,it is important to further analyze and test the effectiveness of the targeted RRR cuts policy and the potential factors that affect the effectiveness of the targeted RRR cuts policy.At the same time,it is of great practical significance to put forward suggestions that help to improve the effectiveness of the targeted RRR cuts policy.At the same time,the domestic and international economic situation is complex and changeable.In order to cope with the complicated domestic and international economic problems,the Chinese government has issued a series of policies and measures to promote the stable and healthy operation of the economy.However,frequent policy initiatives and expectations that are difficult for the public to anchor will increase the Economic Policy Uncertainty(EPU).EPU will not only impact the macro-economy of our country,but also increase the difficulty of the targeted RRR cuts policy operation,affect the effectiveness of the targeted RRR cuts policy,and then affect the strategic goal of completing the structural adjustment of our economy.This article attempts to incorporate EPU into the transmission mechanism of the targeted RRR cuts policie.Theoretical and empirical analysis of the effects of EPU on the effectiveness of the targeted RRR cuts policie and the empirical test of EPU affects the reduction Mechanisms for policy effectiveness.This paper studies the impact of EPU on the effectiveness of the targeted RRR cuts policy,which can theoretically enrich and expand the research framework of monetary theory,especially structural monetary policy theory under the new normal.In policy practice,it will help the central bank to unblock policy transmission.This study will be important for the mechanism of monetary policy,grasping the intensity and timing of policy regulation,improving the effectiveness of the targeted RRR cuts policie,and promoting economic structural adjustment.This paper reviews the practice of monetary policy,especially the "China Monetary Policy Implementation Report" published quarterly by the People’s Bank of China since the implementation of the targeted RRR cuts policy.It is found that the central bank attaches far more importance to the "structural" monetary policy.When the central bank communicated with the public,it repeatedly transmitted strong signals that it expected to use monetary policy tools to support economic structural adjustment and stabilize economic growth.In different research backgrounds,the term "economic structure" adjustments have different meanings,such as the three industrial structures,regional structures,and urban-rural structures.The main research object of this article is the effectiveness of targeted reduction policies.The main objectives of targeted reduction policies are to "support economic structural adjustment","to support the growth of ’agriculture,rural areas,farmers,and small and micro enterprises’ in areas of weak national economy,and to support other targeted Sectoral Enterprise Development." Therefore,the "economic structure" mentioned in this article refers specifically to the structure of "targeted sectors" such as "agriculture,rural areas,farmers,and small and micro enterprises" relative to "non-targeted sectors".The effectiveness of the targeted reduction policy mainly means that compared with non-oriented enterprises,the targeted reduction policy promotes the growth of targeted enterprises more.The theoretical analysis and empirical research in this paper are centered on this important connotation.By combing domestic and foreign literature,this paper believes that the existing research provides a good research basis for this article.On the one hand,the literature on the uncertainty of economic policy has been abundant since the recent period.These studies have comprehensively and meticulously focused on the impact of economic policy uncertainty on macro-micro economic variables.Most of them believe that EPU significantly affects the decisions and behaviors of market players.On the other hand,scholars are paying more and more attention to the evaluation of the effectiveness of directional control policies such as directional reduction policies,and new related researches continue to appear.Many studies have affirmed the role of the targeted RRR cuts policie,but have also questioned their policy effects.This article believes that there are still some shortcomings in the existing research.On the one hand,there are few studies on the uncertainty of economic policies affecting the effectiveness of monetary policies,especially the lack of studies on the effectiveness of EPU that affect the effectiveness of monetary policies of targeted regulation.On the other hand,research on the effectiveness evaluation of targeted regulation policies is also scarce.More importantly,the previous research on the effectiveness of the targeted RRR cuts policy was based on a certain perspective,such as the availability of corporate credit,to assess the effectiveness of the targeted RRR cuts policy,and did not explore the effects of the policy more comprehensively;even most studies The policy effect was considered to be limited,and no clear explanation was given,and the potential factors affecting the transmission mechanism of the targeted reduction policy were ignored.The theoretical analysis of this article holds that: the targeted RRR cuts policy has a total effect and a structural effect,but EPU will weaken the total effect and the structural effect of a targeted reduction policy.The targeted RRR cuts policy is a special deposit reserve policy.It mainly relies on commercial banks to lend to targeted enterprises,which are specifically implemented by commercial banks to passively achieve their policy goals.Therefore,the commercial bank’s credit issuance is an important issue that cannot be ignored in its transmission mechanism factor.the targeted RRR cuts policy mainly affects the currency multiplier and the excess deposit reserve of commercial banks,which increases the total amount of loanable funds in the commercial banking system and the total amount of credit that commercial banks invest in the market,thus having a total effect.Due to factors such as the degree of credit facilities,the return on venture capital,information asymmetry,and the willingness of market players,uncertainties in economic policies affect and reduce the overall effect of targeted reduction policies.The targeted RRR cuts policy exerts structural effects through the role of credit guidance and signal.However,due to factors such as the characteristics of targeted enterprises,the uncertainty of market behavior,the micro-characteristics of banks,and convergence effects,EPU will affect and weaken the structural effects of the targeted RRR cuts policy.The targeted RRR cuts policy promotes the growth of targeted enterprises through credit availability mechanism,consumption mechanism and investment mechanism,but EPU will affect the above three mechanisms,which will further weaken the effectiveness of the targeted RRR cuts policy.The targeted RRR cuts policy has increased the credit availability of targeted enterprises;due to the EPU,it has a certain negative impact on bank credit business,affecting corporate borrowing costs,and other reasons.The role of enhanced credit availability has been weakened.The targeted RRR cuts policy promotes the demand for targeted products and services indirectly by increasing the supply and circulation of money in certain industries or fields,and indirectly stimulates the demand for targeted corporate products and services,and promotes society.Consumption of targeted enterprises’ products and services increases;while EPU will affect consumer activities through multiple channels,such as increasing the costs of targeted enterprises,inhibiting the promotion of targeted corporate reduction policies on the level of consumption of targeted enterprises’ products and services.The targeted reduction policy promotes the rise in the investment level of targeted companies through signal effects and corporate financing constraints.According to theories of real options and financing constraints,EPU will reduce the positive effect of the targeted RRR cuts policy on investment.The empirical research in this paper validates the viewpoints and theoretical hypotheses proposed in the theoretical analysis of this paper.First of all,compared with before the targeted reduction,the targeted RRR cuts policy has promoted the growth of small and micro enterprises and played a role in adjusting the economic structure;EPU will affect and weaken the targeted RRR cuts policy in promoting small and micro enterprises.The positive role in growth has reduced the effectiveness of targeted economic adjustment policies to adjust the economic structure.the targeted RRR cuts policy has a significant promotion effect on the growth of private agricultural enterprises,but the impact on the growth of state-owned agricultural enterprises is not obvious.EPU will affect and weaken the positive role of the targeted RRR cuts policy in promoting the growth of private agricultural enterprises.To reduce the effectiveness of targeted economic adjustment policies to adjust the economic structure.Secondly,the targeted RRR cuts policy has a total effect,which promotes the expansion of bank credit markets.EPU will affect and weaken the overall effect of the targeted RRR cuts policy.the targeted RRR cuts policy has a structural effect,which has a significant effect on promoting the flow of credit to small and micro enterprises and the agricultural sector.EPU has affected and weakened the structural effect of the targeted RRR cuts policy.Finally,the targeted RRR cuts policy promotes the growth of targeted companies by increasing the availability of targeted companies’ credit,increasing the consumption of targeted products and services by the society,and promoting the growth of targeted companies.However,EPU affects the credit availability mechanism,consumption mechanism,and investment mechanism of targeted reduction policies,and weakens the transmission effect of these mechanisms,thereby reducing the effectiveness of the targeted RRR cuts policy.The policy recommendations in this paper mainly include: First,macro-control departments should pay attention to the role of aggregate regulation that they may play when they use structural monetary policies such as the targeted RRR cuts policy.Secondly,in order to improve the effectiveness of the targeted RRR cuts policy,from the perspective of commercial banks as credit providers,macro-control departments should pay attention to “suiting the business conditions” and implement differentiated targeted RRR cuts policys;Incentives of banks and rural commercial banks to increase the margin reduction of such commercial banks;when uncertain factors such as EPU increase,macro-control departments should increase policy incentives for commercial banks to encourage It continues to provide credit support to targeted enterprises and other weak areas of the national economy.Thirdly,in terms of promoting the growth of small and micro enterprises,although the targeted reduction policy has played a role in adjusting the structure to a certain extent,the macro-control department still needs to work hard to clear the transmission mechanism of the targeted RRR cuts policy to small and micro enterprises.Large-scale and small-and micro-enterprises’ directional support efforts to enhance their ability to obtain financial resources.Third,macro-control departments must consider the EPU.Frequent adjustments of economic policies are not conducive to the effective implementation of the targeted RRR cuts policy.They should formulate reasonable policy implementation rules to avoid increasing economic intervention in order to achieve short-term economic goals.Finally,macro-control departments should strengthen communication with market entities,especially those with less financial resources,such as targeted enterprises;and improve the transparency and predictability of economic policy decision-making processes.Pay attention to guiding market behavior and social psychological expectations,strengthen communication and integration with market actors,and avoid excessive market reactions.The innovations of this paper mainly include: First,this paper evaluates the effectiveness of the targeted RRR cuts policy from a new perspective of EPU,and attempts to give potential reasons and reasonable explanations that the targeted RRR cuts policy may be less effective than expected.The second is the empirical analysis of the impact of EPU on the behavior of commercial banks after the implementation of the targeted RRR cuts policy,providing micro-empirical evidence from the level of commercial banks in China for related research on EPU and the targeted RRR cuts policy evaluation studies.Third,based on the main connotation of the effectiveness of the targeted RRR cuts policy,the empirical analysis of the effectiveness of the targeted RRR cuts policy and EPU on the effectiveness of the targeted RRR cuts policy is an important supplement to existing research.