The Theoretical And Empirical Analysis Of The Asymmetric Effects Of Monetary Policy In China

Monetary policy plays an important role in controlling aggregate demand and inflation. Therefore, it is meaningful to study the asymmetric effects of monetary policy. There have been many studies about this issue since the1930s. Taking use of different research method, scholars at home and abroad find out the evidences for the existence and pattern of manifestation of the asymmetric effects of monetary policy based on their countries’monetary policy practice. They have proved that the effects of monetary policy are depended on a lot of factors such as the economic cycles and inflation. The instruments, transmission channel, anticipation and time lag are also important.Commercial banks are the core of financial activities and also play an important role in monetary policy practice. After financial crisis in2008, policy makers and scholars pay more and more attention to the role which commercial banks play during this period. They come to the conclusion that the loose monetary policy in the long term stimulated the risk-taking of commercial banks, which accelerated the accumulation of risks in the whole bank system. It is one of the most important reasons why the sub prime mortgage crisis broke out and spread widely to the global. There is a bidirectional relationship between the risk-taking of commercial banks and the monetary policy. Since the present literatures are focused on the impact of monetary policy to the risk-taking of commercial banks, this paper based on the other side is a developmental attempt.The first part makes a review about the monetary policy practice and the state of risk-taking of commercial banks in China from2006to2012and analyzes the impact of the state of risk-taking of commercial banks to the effects of monetary policy in a sketchy way. The second part introduces the risk-taking of commercial banks factor to the CC-LM model, and discusses the impact of the state of risk-taking of commercial banks to the effects of monetary policy through the comparative static analysis. This part comes to the conclusion that the asymmetric effects of monetary policy do exist while the monetary policy is affected by the risk-taking of commercial banks and capital regulation. The third part is the empirical analysis. Based on the definition of the risk-taking of commercial banks and relevant literatures, this part firstly summarizes the method of bank risk-taking measurement and determines the reasonable variables. Then through a series of tests the asymmetric effects of monetary policy are verified: Affected by the risk-taking of commercial banks, the effects of the restrictive monetary policy are weakened and reversed while the effects of loose monetary policy are retained. The last part is the conclusion and some policy suggestions.The innovation of this paper may include:First, there is a bidirectional relationship between the risk-taking of commercial banks and the monetary policy. Since the present literatures are focused on the impact of monetary policy to the risk-taking of commercial banks, this paper based on the other side is a developmental attempt.Second, since the present literatures are focused on the empirical tests of the asymmetric effects of monetary policy, this paper attempts to make an exploration to study this issue with an theoretical framework.