China's Monetary Policy Credit Conduction Channel Research

Whether monetary policy can have effect on the real economy activities through the operation on monetary policy tools then changing specific economic parameters in effect depends largely on smooth monetary policy transmission channel. Since the central bank cancelled the size of loan limit for the commercial bank in1998, monetary policy is changing from direct control to indirect control. But the reform of our financial system is very slow. The financial market environment for monetary policy transmission is immature. Credit management is still an important means to regulate economic entity for the central bank. Credit channels play an important role in the transmission of monetary policy in our country at present. This article does empirical research on monetary policy credit transmission from two perspectives the bank credit channel and the enterprise balance sheet channel basing on the descriptive analysis of the present situation of China’s monetary policy transmission. Monthly data from1998to2011are used to build VAR model to study the effect of the bank credit channel to the output. Annual financial data from2001to2010of the listed company in China are used to establish a panel data model to analyze the enterprise balance sheet channel of monetary policy transmission.In the part of VAR model, this paper makes full use of co-integration test, granger causality test, impulse responses and variance decomposition technologies to study the influence to the output through the bank credit channel. The empirical results show that compared with M2, loan can explain more to the change of the output. Loan can make asymmetry effect to the output of state-owned sector and the private sector. Static and dynamic analysis results show that loan has very different effect to pull output in different economic boom stage. Monetary and credit channels of monetary policy transmission both are effective. Credit channel is the main channel of the monetary policy transmission at the present stage in China. The function of credit channel has been weakening from the result in comparison analysis of the mutual influence between loan and output of the three stages in this paper. There is one-way causality relation between loan and the money supply, the size of loan plays the actual role of intermediate target of monetary policy at present. But in the monetary policy operation process, M2shows superior sensitivity than the size of loan. Money supply and the size of the loan show a degree of complementary to each other as two monetary policy intermediary variables. The results of Panel Data model show that profit ability, financing ability, mortgage ability and other enterprise personality characteristics have significant influence on the lending ability of the listed company. The change of the money policy can affect the loan availability through the effect to the individual characteristic variables of the listed company, but this kind of influence shows a strong short-term property. The special attention to the characteristic variables of the listed company of the commercial banks when they lend money can strengthen the asymmetric effects of the monetary policy enterprise balance sheet channel. The empirical results shows that monetary policy transmission function through enterprise balance sheet channel is exist, but from the view of having effect to the ultimate goal of monetary policy, the balance sheet channel is not significant. When the bank credit channel and enterprise balance sheet channel are concerned, the bank credit channel under the total size regulation plays the main role in the monetary policy credit channel transmission.Finally, this paper gives a summarization of the main conclusions. In order to optimize the operation of monetary policy and improve the effectiveness of monetary policy, according to the empirical results this article gives some feasible suggestions.