A Study On The Influence Of Shadow Bank On The Transmission Efficiency Of Credit Channel In China

Monetary policy is one of the major economic policies to control macroeconomic operation. The answer to that depends on the smooth of the monetary policy transmission channel to a large extent. The reality of our country determines the dominant position of credit channel in monetary policy transmission. Therefore, the realization of the macro economy objectives are largely dependent on the smooth of credit channel. However, the shadow banking system, which is parallel to the commercial banking system, has changed the theoretical premise and the mechanism of this channel to a certain extent. Because of the prosperity of financial products, the corporation between banks and Trust or Insurance, the credit market still maintains a boom on the condition of tightening, and thus hedge the effect of monetary policy to a certain extent. This paper will introduce the new factor shadow banking, It is the first step to modify the classical CC-LM model with the shadow banking variables to explain how the shadow banking affects the money supply, the number of bank loans, and the effect of monetary policy. Secondly, based on the perspective of financial accelerator, establishing the dynamic stochastic general equilibrium model to Lay a solid theoretical foundation for effects of the shadow banking on the balance sheet and then the monetary policy. In order to verify the theoretical analysis and the reality of the situation, it is necessary to construct Co integration, Error Correction and SVAR model to respectively test the impact of shadow banking on monetary policy credit transmission empirically from the short and long period. As a result, the credit channel lead to the asymmetrical effect of monetary policy, while the abnormal activity of shadow banking’s money creation has changed the traditional credit transmission mechanism, To a certain extent, it has weaken the inhibitory effect of the tightening policy and correspondingly enhanced the effect of expansionary monetary policy to the economic recession, which has weakened the effect of monetary policy, but also has the potential to increase the risk of macroeconomic fluctuations. Therefore, the paper finally put forward corresponding policy recommendations on how to improve China’s credit channel transmission, enhance the effect of monetary policy regulation, improve the central bank’s macro-control ability and also supervise and manage the shadow banking system effectively.