The Effect Of Balance Sheet Channel On Monetary Policy From The Micro View

As the influence of macro monetary policy on the real economy, the balance sheet channel becomes one of the important mechanisms which attract more attention. The asymmetric information between banks and enterprises that is the imperfection of financial market would make the enterprises'borrow money from banks become more difficulty by decreasing their credit rating which was caused by the change of their balance sheet condition. Currently in China, although the large and mid size state-owned company could get fund from capital market, bank is still their main source of finance which must affect the effect of monetary policy.First, the author describes the traditional Money View and the Bank Lending Channel. Then the author analyzes the Balance Sheet Chanel Particularly, including its characters and mechanism The author also introduces the typical foreign Papers in this field, providing reference for the analysis of Balance Sheet Channel in China.On the basis of Chinese general position, the paper gives an outline of the related theory of balance sheet channel and supply a comparison of international experience of several countries. The test which uses 130 Chinese public firms'accounting data in manufacturing analyzes that the relationship between fixed assets investment and cash storage. The results are as follows:1. Investments of financially constrained firms are more sensitive to the financial condition, that is to say the response of different firms to monetary policy is different.2. Balance sheet channel effect is more effective in periods of monetary tightness.Then we analyze the cause of the difference in different firms in the next part. At last, the author also put forward three suggestions:First, constructing new relationship between bank and enterprises to decrease the asymmetric information;Second, strengthening the supervision on commercial bank credit fund to reduce risk;Third, enhancing the construction of credit information system of enterprises.The innovation of this paper lies in its analysis view-from the view of firm balance sheet, and we classify enterprises in financially constrained firms and unconstrained firms according to financial policy. To study the balance sheet channel theory in China, we look at public enterprises due to the difficulties in finding data related to media and small and medium enterprises and couldn't study the balance sheet channel effect of different size enterprises.