Research On The Effect Of Money Market Monetary Policy Transmission

The currency market, referring to the short-term capital market within a year, plays an important role in a nation’s financial system. Usually speaking, the most basic function of the currency market is financing, namely to resolve market participants’short-term or temporal fund demand. However, the currency market in today’s financial system has a more important function, that is to lay a foundation and platform for the operation of the monetary policy established by the central bank. Firstly, the issuance and circulation of various financial instruments on the currency market makes flexible operating tools available to the central bank’s indirect regulation and control. Only through the currency market can such policies as open-market operations, rediscount and deposit reserves can influence market participants’ investment and consumption behavior. Secondly, the increase of the participants on the currency market broadens transmission channels of the monetary policy. When on the currency market the category of the participants which with commercial banks as main participant remains single, the bank credit channel almost become the only way of the transmission of the monetary policy. While with the incessant increase of the participants on the currency market and the enhancement of the connection between the currency market and the capital market even the real economy, the transmission of the monetary policy can not only be through commercial banks’ credit channel but various participants’ asset adjustment channel, then its efficiency can be improved. Thirdly, the benchmark interest rate formed by the capital’s supply and demand relationship on the currency market makes the operation of the monetary policy more accurately. In those countries in which the interbank market has a full development, the interbank market, as the wholesale price of the social capital, can reflect most sensitively and directly the capital’s supply and demand condition on the currency market, therefore, when operating the monetary policy, the central banks usually consult with the interbank rate. Hence, as far as the relationship between the monetary market and monetary policy concerned, we have reason to assume that without a sound and thorough monetary market the central bank can not estimate correctly the social and economic development need, accordingly can not use flexibly the operating tools established by the monetary policy to achieve successfully the goal of the monetary policy.Since the Third Plenary Session of the Eleventh Central Committee of the Party formulated the development strategy of the reform and opening up in1978, China has entered the economic and financial system reform process led by the government. With the economic and financial system reform push in full swing and deep, our country’s commodity economy has gained rapid development, and commercial credit has appeared again. At the same time, the " unification" of the financial system is broken, the People’s Bank of China specifically exercise of the functions of a central bank, formulating and implementing the monetary policy and various types of financial institutions have resumed and established. Economic and financial development of the money market to generate strong demand. The development of economy and finance generate a strong demand for the money market. Thus, in the1980s, China’s money market has re-appeared and rapidly developed.However, there are still many problems during the rapid development of China’s money market. To a large extent, these problems affect effectively implementing the monetary policy, which may play a role as obstructions in the monetary policy transmission process. It is in this context, this paper, through the study of the impact of China’s money market on the monetary policy transmission, in-depth analyses the restrictions to China’s monetary transmission policy in money market, and on this basis, puts forward the measures in developing China’s money market and improving the efficiency of monetary policy transmission.