The Research On The Effectiveness Of Monetary Policy Transmission Mechanism Based On Vector Autoregressive Model

Monetary policy transmission mechanism focuses on how monetary policy and tools influence real economy through various financial variables. Monetary policy transmission is started from the central bank's using monetary tools which can cause a series of changes in some important financial variables and even economic variables, ended in the achievement of the monetary terminal goals. As it links the monetary factors with real economy and determines the efficiency of monetary policy, it is the core theory of monetary policy.Nonneutral theory is the premises of research on monetary transmission mechanism. Monetary policy can affect macro economy and the study of transmission mechanism will make a sense only when money is nonneutral in short term. The research of monetary policy transmission mechanism consists of two aspects: Monetary policy transmission elements including monetary policy goals, monetary policy tools, monetary policy transmission carrier and participants; the other aspect is Monetary policy transmission procedure including economic variables transmission and economic participants transmission which are parallel.Monetary policy transmission mechanism's development in China can be separated to four periods: severe clampdown period before reformation, direct control in 1980s, transmission from direct control to mediate control in 1990s, and mediate control in later 1990s. In China's monetary policy transmission mechanism, the monetary transmission channel can hardly function and there is barricade in the credit transmission channel. By adopting VAR method to analyze China's Monetary policy transmission from 2000 to 2005, we conclude that Monetary policy transmission mechanism in China is weak efficient.Therefore, this paper put forward three countermeasures to optimize the efficiency of China's Monetary policy: perfecting the construction of financial market playing the role of carrier of Monetary policy transmission, building health efficient monetary market and establishing the linkage of the two markets; second, accelerating the reformation of micro-participants strengthen the central bank's capability of controlling the economy, leading the enterprises and residents to behave more rationally; thirdly, perfect the external environment of Monetary policy transmission, speeding the procedure of interest marketliztion, emphasizing setting up credit mechanism, accelerating the reformation of exchange rate formation mechanism.