The Research Of "Price Puzzle" In China Based On Asymmetric Effects Of Monetary Policy

According to the traditional theory of monetary policy: tightening monetary policyto curb inflation through inhibition of total demand, but in recent years according to theregulate and control measures of China’s monetary policy and the real control results, itcan often appear the phenomenon that the price rising with the implementation of tightmonetary policy. This phenomenon is what we usually called "price puzzle"phenomenon. The most popular explanation for the "price puzzle" is that monetarypolicy has lagged behind, however, by comparing the States "price puzzle" duration, wefound that the lag period of at least5months up to48months, so we need a theory toexplain what induce the lag period, it is necessary to carry on further research on thisproblem.Through a simplified dynamic general equilibrium model, we dynamic describe thesupply effect as well as the demand effect in the process of monetary policyimplementation, and through the market equilibrium we described the long, short termasymmetric effects of supply and demand effects, taking this as a starting point toexplain the reasons for “price puzzle” formation. Then using the monthly data of Chinafrom1998to2012, and through the SVAR model and impulse response function,analyzed the effect of monetary policy on the price level. And reached the followingmain conclusions:(1) through the empirical evidence shows that tight monetary policywill lead to the rise in prices in a certain period of time, and the duration lasts about11months, the supply effect from “credit-cost channel”exists;(2) The "price puzzle"phenomenon arising from the asymmetric influence of supply and demand effects,effects of long term. The short term supply effect is greater than the demand effect, butlong-term demand effect is greater than the supply effect;(3) Compared with Numberregulation tools of monetary policy, Price regulation tools in the supply effect of theconduction process is more obvious, compared to Money supply the changes in interestrates is more prone to "price puzzle" phenomenon.(4) factors of China’s industrialstructure, credit market information asymmetry, the banking market structure, enterpriseof indirect financing dependence degree, strengthens the supply effect. Based on aboveconclusion on optimal monetary policy we put forward the corresponding policyrecommendations.