Effect Of Regional Differences Of China's Monetary Policy Research

The Chinese uniform monetary policy has different impacts on different provinces since each province has different natural resources, economic development level, etc.. It is very significant to deeply research Chinese uniform monetary policy's provincial asymmetric effects and determinants because this study can improve operational effectiveness of monetary policy and facilitate the balanced regional development.Theoretically, the same input of financial monetary policy may case different outputs in an unbalanced economic body. If a uniform monetary policy is adopted, unbalanced monetary policy effect will be caused and the economic relationship between different regions may be damaged. Therefore, the unique financial policy seems to be fair for different regions, however, it may cause serious unbalance in the real economic surroundings and lead to conflicts among different regions. The monetary policy should not be simple and unique but be practical. However, our government has ignored the differences among areas and adopted a unique policy. It turns out that this kind of policy does not help the coordinate development of regional economy and steady processing of macro-economy.This thesis investigates Chinese monetary policy's provincial effects by utilizing VECM over the period 1985-2006. Firstly, it conducts the empirical analysis of impacts of base money on each province's M2. Secondly, the impacts of each province's M2 on provincial real variables are empirically studied. Through these above empirical study, this thesis finds that Chinese uniform monetary policy has great asymmetric provincial impacts. Thirdly, this thesis examines the determinants of Chinese asymmetric impacts and finds that there exists the positive correlation relationship among cumulative provincial impulse response, loan-deposit ratio and provincial real variables. The above result provides the evidence that China exists credit channel of monetary policy. The determinants analysis also indicates that provincial openness is an important factor affecting asymmetric provincial impacts.In many past researches, the regional monetary effect is studied between the east region, the middle region and the west region, and the adopted economic variables are M2 and provincial GDP. In this article, we used basic money as monetary policy tool and M2 as a medium variable in order to analyze the relationship between M2, GDP and basic money. Since the used data of all the provinces are various and different, some of them does not meet the demand of VEC. Fore example, data of some provinces are lost. Therefore some provinces are neglected in the research of this article.After systematically studying Chinese monetary asymmetric affects, this thesis provides some policy suggestions on monetary policy's regional operation such as perfecting regional financial supervision indices, establishing regional operation model of monetary policy, adjusting the rights of central bank's branches, etc..