The Research On Balance Sheet Transmission Mechanism Of China’s Monetary Policy

Monetary policy transmission mechanism is a process that the central bank uses monetary policy tools to achieve the central bank objectives, including the change of money supply and other monetary policies that affect actual and nominal variable. In fact, monetary policy transmission analysis is based on the framework of monetary policy effectiveness. The ultimate goal of analyzing monetary policy transmission mechanism is to realize the effectiveness of monetary policy that influences output and price. Balance sheet transmission mechanism is presented by Bernanke and Gertler in1995.They pointed out that this transmission mechanism was that the monetary policy can affect the enterprise’s mortgage assets and cash value, and, in the environment of information asymmetry, the bank would change assessment of the business risk which makes enterprises more difficult to get the loan. Finally, it will affect the monetary policy objectives. Analysis of resident balance sheet transmission mechanism is similar to the analysis of enterprise balance sheet. In the shock of monetary policy, the wealth, mortgage assets value and consumption expectation of residents will change, which change personal consumption expenditures(consumer loan,).In the end, the monetary policy objectives change.This paper firstly introduces the basic monetary policy theory, which analyses the monetary policy transmission mechanism theory of Keynes and Monetarist school. Secondly, this paper mainly expounds the balance sheet transmission mechanism. on the basis of theoretical analysis. Thirdly, this paper makes a concrete analysis of the enterprise and residents balance sheet transmission mechanism in our country, which confirms the existence of balance sheet transmission. Fourthly, the paper makes an empirical analysis. The monetary policy intermediate target affect the factors of balance sheet, then affect the credit amount, consumption expenditures, the last is monetary policy objectives. Through empirical analysis, we know that Chinese enterprise and resident balance sheet transmission mechanism are existent. But, the changes of balance sheet factors don’t obviously affect credit amount, and credit amount don’t obviously affect monetary policy goals. Meanwhile, residents’ deposits and real estate value are not sensitive to the monetary policy change. So, the balance sheet transmission mechanisms have some obstructions. In order to make monetary policy more effective, at last, this paper puts forward the relevant policy suggestions for the enterprise balance sheet transmission mechanism. This paper’s advice is that we should improve social credit and related legal environment, at the same time, we need change the relationship between bank and enterprise, making the bank more independent for resident balance sheet transmission mechanism. This paper’s advice is that we should increase household income, reduce the resident income gap, perfect the social welfare system and expand residents’ investment channels.