Empirical Analysis Of China's Bank Credit On The Economic Impact

At present, many scholars admit the existing of the credit channel of monetary policy transmission mechanism. The central bank could effects the economy through controlling bank credit.In this paper, the author empirically analyzes the relationship among bank credit, economic growth, CPI and the price of real estate. In China, bank credit is the main source for the financing of medium and small-sized enterprises. Since 1998, People's Bank of China abrogated the limit on the scale of bank lending. The method of regulation of monetary policy has changed and commercial banks can manage business by their own principles. The demand and supply of credit can be showed by the market. Therefore, the author selects the data from the first quarter of 1999 to the fourth quarter of 2009 for testing the effects of bank credit.Meanwhile, the growth of economy and the stabilization of product price are two goals of monetary policy. The stabilization of price has significant influence on the growth of economy. Uncertain changes of price can destroy the economy: the unanticipated fall of price can evoke the panic of society, lowering the productivity of enterprises and diminish the scale of production; the unanticipated rise of price can arbitrarily distribute the fortune, weakening the function of money as a measure of value and medium of exchange, leading to the lower efficiency of economy. While real estate is the pillar industry of national economy, it can affect the economy significantly through Tobin'q effect and wealth effect. Recently, the price of real estate is ring up continuously by amount of money flowing into the market of real estate. Given the sub-prime crisis of America, asset price bubbles can shake the whole system of finance, quake the economy. Therefore, the author selects the bank credit, GDP, CPI, price of real estate as variables.The author establishes an auto-regression model at first, using methods of Johansen cointegration, Granger causality test, Impulse response function, Variance composition analysis; the result of Johansen cointegration shows that there is a long-term relationship between bank credit, GDP, CPI, price of real estate. The result of Granger causality test shows that bank credit is the Granger causality of GDP and price of real estate; the result of variance composition analysis shows that monetary policy has a positive effect on GDP through credit channel, but has six quarters time-lags. There are many factors which could influence the growth of economy. Real estate has big contribution to the growth of GDP, and this shows that investment promotes the growth of economy. Bank credit also has a positive effect on CPI, but it is not the main factor that causes the fluctuation of CPI. The anticipation of CPI causes its own fluctuation. Bank credit is the main factor that causes the fluctuation of real estate price, furthermore, it has a positive effect.It's important for the growth of economy to adjust the structure of bank credit and keep the pace of credit supply. In the end, the author gives some suggestion about how to adjust the structure of bank credit and keep the pace of credit supply.