| The way which the monetary policy impacts on the economy is considered as monetary policy transmission. To most extent, monetary policy transmission determines the efficiency of monetary policy. Therefore, the theory of monetary policy transmission is at the very core of that of monetary policy. There are two distinctive arguments about monetary policy transmission, namely money channel and bank lending channel. It is a controversial issue about the existence and significance of bank lending channel. However, China is in a state which has been switching planned economy to market economy. For a long time, bank lending channel has been the main way in monetary policy transmission, but the economic environment and monetary policy control system have changed significantly since 1998. In this context, this dissertation analyses the influence of the change, which is caused by shifting monetary policy control system from direct control to indirect control, on monetary policy transmission. It suggests that although the bank lending channel is still the principal system of monetary policy transmission, the weakness of transmitting mechanism of credit that is caused by various reason has resulted in low efficiency of monetary policy. The article will explore the causes of the weakness of transmitting mechanism of credit from several perspectives, such as the central bank, banks, enterprises and citizens and eventually propose practical solutions to improve the situation during the period of transition. |
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