Analysis And Optimization Of The Obstacles Of China's Monetary Policy Transmission

Monetary Policy is an indispensable tool to modem macro-economic regulation. In order to start up the economy, a series of expansionary monetary policies have step by step been put into practice ever since 1998. The intensity and frequency of monetary regulation are unprecedented strong. However, the regulation effect of monetary policy to macro-economy is far from good. The obstacles existing in the transmission process prohibit monetary policy from playing its role fully. The strength of monetary regulation is sharply reduced during transmission though it is fairly powerful in the very beginning. At present, the international economy is in depression and the slowdown of world economy has begun to affect our economy in a negative way. Accordingly, it is still uncertain whether our economy will continue to grow steadily or follow the international economy dropping into depression. This request that the strength of macroeconomic regulation should be enhanced to enlarge internal demand and to support the steady increase of the national economy. There are some unavoidable disadvantages in the use of fiscal policy and meanwhile, China has used expansionary fiscal policy continuously in the past 3 years. The space left in using fiscal policy solely to intensify policy support is limited. Under such circumstances, monetary policy is of much importance in macroeconomic regulation. Nowadays, the key problem that influences the effect of monetary policy is the low efficiency of the transmission. So first of all, we should find out the obstacles existing in the transmission process and study how to optimize the transmission efficiency.This paper centers on the obstacle in the transmission of China monetary policy and its optimization and the structure is as following: In the first part, western theories on monetary policy transmission will be introduced. Based on these theories as well as the reality of China, a conclusion about the transmission channel that applies to China is drawn. In the second part, the conditions needed in the effective transmission of various channels are summarized. In the third part, I try to find out why our country's monetary policy can't be transmitted smoothly. Then in the last part of this paper, some solutions are put forward to optimize the monetary transmission.