The Analysis On The Regional Effect Of Monetary Policy In China

Theoretically, the homogenization of economy and the consistency of economic cycle in a currency area are the premise of a unified monetary policy implementation. But the reality is always not that case, the unified monetary policy always produces regional effect. As a typically big country, the difference of economic development between the areas in China is becoming large with the rapid development of economy and living standard. As a gross nature of the regulatory policy, monetary policy should be maintain unity in the nationwide, but the current" rigid uniform " policy seriously neglected the differences of the regional economy, and greatly reduced the effectiveness of monetary policy.At the same time, the gap of economic development between areas is further widening. Therefore, the regional effects of monetary policy has become an urgent need to address the problem, the monetary authorities in the implementation of unified monetary policy should also be pay attention to regional differences, and strive to avoid the regional effects of monetary policy effect.At present, the domestic research on the regional effect of monetary policy just beginning, whether the depth and breadth of theoretical research, or the method of empirical research and argumentation, many places need to be improved. The in-depth study on the regional effect of monetary policy helps to improve the effectiveness of Chinese monetary policy, and promote Chinese regional economic and financial development.In this paper, the first part is the introduction. In this part, the source and significance of topic selection are given firstly, and then I give a simple review of the research on the regional effect of monetary policy. Finally, I sum up the mainstream research methods and the need for further discussion.The second part is the theoretical analysis on the existence of regional effect of Chinese monetary policy. In this part, I give a division firstly:using a cluster analysis on the average value of market index in31provinces and cities between 2001and2010. Then, I use the theory of optimum currency area as the breakthrough point, present the optimal currency area standards. Finally, I make a preliminary judgment on the existence of regional effects of monetary policy in China after comparing with the optimal currency area standards.The third part is the empirical test on the existence of regional effects of monetary policy in China, In this part, I choose Chinese monetary policy measures through the VAR model, and then use co-integration equation to test the existence of regional effects of monetary policy in China.The fourth part is the analysis on the cause of regional effects of monetary policy in China. This part points out that the basic cause of regional effect of monetary policy is the interaction between total demand and total supply. So I analyze the reasons for the differences of monetary policies’impact on the regional consumption, investment and net export from the angle of total demand. And then analyze the reasons for the difference of the total supply curve from the angle of supply.The fifth part is the conclusion and suggestion. I make a simple summary on the front of the contents, and get the following conclusions:First, China is still not an optimal currency area. Second, China should choose the monetary supply as the monetary policy measure. Third, it exists regional monetary policy effect in China. Fourth, from the angle of total demand, the main reasons for regional effects of monetary policy are that the region’s economic development level and income level is not balanced, the marketization and opening degree is inconsistent, and the credit market development degree is not synchronized; From the angle of supply, monetary policy regional effect is mainly due to price difference, anticipation difference, resource gift difference and difference in labor productivity. Then, according to the theoretical and empirical analysis and combining with Chinese economic development, this paper puts forward the policy of two respects:On the one hand, coordinating regional economic structure and development level through fiscal policy, industry policy and other measures; On the other hand, in order to slow the amplification of region economy difference, we can implement the different regional monetary policy under the premise of unity.In this paper, I use the method of combining theory with practice on the basis of the previous researches and study regional effects of monetary policy from a new perspective, and finally propose some feasible suggestions.