Research On Monetary Policy To Optimize The Structure Of Domestic Demand Of China During The Post-crisis Period

Since1978, with the continuous development of China’s economy, the proportion of investments and exports in GDP continue to rise, while the proportion of consumptions accordingly drops, what considered as the signs of imbalance of the structure of domestic demand. After2000, the phenomenon has become increasingly serious. Since2007, China’s consumption rate has been below50%, what means that our country’s economic growth over-reliance on investment and exports. So if there are some problems with the investments or exports, our country’s economy may got great fluctuation.Since2008, the financial crisis has swept the world, many countries’economy have deteriorated, what has caused a great influence on our country’s exports. In response to the economic crisis, China needed to boost the domestic demands to maintain a stable economy. However, due to the domestic consumption grew slowly, the economic policy focused on the investment demand. Therefore, boosting domestic demand ultimately became a unilateral increasing of investment on fixed assets, which further exacerbated the imbalance of the structure of domestic demand in China. And these economic policies brought another sequel, asset prices rising and rapidly inflation. So the research on the effect of monetary policy adjusting the structure of domestic demands has its certain theoretical and practical significance to implement the monetary policy.The first chapter of this paper is introduction. Main contents include:background, significance, literature review, research contents, method, framework, innovation and deficiency of this paper. The second chapter is the theoretical analysis of the domestic demand structure and monetary policy transmission mechanism. Mainly introduces the concept of domestic demand and domestic demand structure, elaborates the monetary policy conduction mechanism of China and the effect on consumption and investment demand, including:the definition of domestic demand and structure of domestic demand, the theory of monetary policy transmission mechanism, the channel of monetary policy adjusting the investment and consumption demand. The third chapter introduces the phenomenon of the imbalance of domestic demand structure in China and the practice of monetary policy during the post-crisis period. This chapter firstly analyzes the domestic demand structure and the imbalance phenomenon of China, secondly talks about the cause of the imbalance, and finally reviews the monetary policy of China during the post-crisis period. The fourth chapter is the empirical analysis about the relationship between the monetary policy and domestic demand structure. As the core part of this paper, this chapter firstly constructs two econometric models and defines variables, secondly makes the empirical analysis about the relationship of investment, consumption and monetary policy with the time series data, and lastly analyzes the results to achieve the conclusions. The fifth chapter is conclusion and policy recommendations. This chapter is a summarization based on the third and fourth chapters’analysis, gives some recommendations to boost the structure of domestic demand of China with monetary policy.The third and fourth chapter is the body of this paper. The third chapter illustrates the development and the imbalance of the domestic demand structure of China with the vertical analysis by time and horizontal comparison by nations. And the chapter summarizes the causes of the imbalance of the domestic demand structure mainly include:the unreasonable income distribution system affects the consumption ability, imperfect social security system reduces the consumption willingness, the lack of government regulation changes the consumption choice, industrial policy and government behavior leads to excessive investment and insufficient consumption. The last section of this chapter introduces and reviews the monetary policy of China against the external impact of financial crisis.The fourth chapter establishes econometric models based on the relationship between the investment, consumption and monetary policy, and makes empirical research with the macroeconomic data from2007Q1to2012Q4. With the results of the analysis, this paper find that the adjustment of the interest rate and money supply will affect the investment and consumption both, and the credit affects the investment much more than consumption. In specifically, the adjustment of interest rate influences investment more than consumption, what means that the elasticity of interest rate to investment is greater. The regulation of money supply will affect the investment and consumption in the same time, but the impact on investment is greater too. The credit affects investment more while affects consumption less. So with the different monetary policy transmission mechanism, using the different tools of monetary policy reasonably can boost the structure of domestic demand.