The Study On Regional Difference Of Monetary Policy Effect In China

Because money is the heart of finance research on the effect of monetary policy has always been a renewing topic. However, most of the researchers chose the macro-perspective and studied in the establishment of economical and financial assumptions of homogeneity, and didn't pay enough attention on the different effect of monetary policy on the regional differences. Since the reform and opening-up policy, China has in the process of economic transition adopted a regional development strategy through a sequential approach. As a result, the homogeneity in regional economy gradually died away. The uniform monetary policy generated asymmetrical effects throughout the country and some areas even suffered from completely adverse effects. If the difference of the regional effects of monetary policy does exist, then the local difference of the monetary-policy effectiveness will have an impact on the overall effect of the effective implementation of monetary policy through constraining the whole. As a result, the performance of a unified monetary policy will be weakened. In fact, the economic structure due to the comparative advantages of different regions, the spatial differences in financial development are both likely to result in the difference of the regional effects of monetary policy. That is to say, the economic impact of the same monetary policy on different regions will be different, leading to the overall effect of monetary policy deviating from the target, which will in turn make the economic growth gap further, not conducive to the national economy's coordinated development. It is therefore absolutely necessary and meaningful to research on the approaches to improve the effectiveness of monetary policy in the current dual structure of regional economy and finance.The paper is based on Chinese current reality that have big differences in the regional economic and focus on the different regional effect of monetary policy. Based on the study of international and domestic research, theoretical analysis and empirical analysis is combined. Firstly, the views of the theory of optimal currency areas, the new Keynesian, Keynesian and monetarist school about the regional effects of monetary policy are evaluated to indicate that the regional effects of monetary policy in our country exist theoretically. Secondly, this particle analyzes the source of the asymmetric character of the regional effects of monetary policy in our country from the perspective of monetary policy transmission mechanism, structural differences in bank, regional differences in financial development, banking development, regional differences in liquidity preference and so on. Based on the theoretical analysis, using the latest data, this article tests the main hypothesis through unit root test and cointegration test, VAR model, impulse response functions and other measurement tools empirically. The empirical result confirms that the regional effects of monetary policy in our country do exist, i.e., the effect of monetary policy in eastern region is stronger than the central and western regions. Finally, combining the characteristics of each region, for the status of the regional control of monetary policy, targeted policy recommendations have been proposed to help reduce regional differences of the effects of monetary policy in China .