Research Of China’s Monetary Transmission Effect With Financial Regulatory Constraints

Although it has been six years from the global financial crisis triggered by theU.S. subprime mortgage crisis, but I believe that every person who experienced thecrisis are still felt deeply havoc. After the crisis, many experts and scholars study themain reason of international economic crisis. Today, we have clearly know that excessliquidity is the macro backdrop of the U.S. subprime mortgage crisis, macroeconomicvolatility is the deep-seated causes, and the American real estate market decline is thedirect cause. At the same time a crisis characterized by a large number of bankfailures illustrate government financial regulation and omissions. In2010the BaselCommittee issued "Basel Ⅲ", led the new round of reform of the financial regulatorysystem. Its main purpose is to establish a counter-cyclical capital regulationmechanism and macro-prudential supervision system.Although China has made great contributions to the stable development of theworld economy, but the frequent use of monetary policy makes China’s economy toemerge inflation slowdown phenomenon after the crisis. But why monetary policycould not fully achieve the desired effect? When monetary policy has finally started toshow significant results, its enormous destruction on the real economy is beginning toshow. So that China’s economy emerge inflation and slowdown after the crisis.Researching the conflict between monetary policy and financial regulation, andseeking effective coordination between monetary policy and capital regulation areimportant to solve the lack of financial regulation policies, to promote the timelinessof monetary policy and to maintain macroeconomic and microeconomic stability.This paper analyzes the regulatory constraints on bank capital impact of themonetary policy transmission mechanism. Based on the panel data of1998-2013of14major commercial banks, this paper tested the impact of capital constraints onmonetary policy internal conduction process. This paper established MARMA modelto test the external conduction effect of monetary policy under regulatory capitalconstraints. In the case of the presence and absence of bank capital constraints, thispaper analyzed the impact of monetary policy and macroeconomic impact on thesupply of credit, and analyzed the root causes of conflict between financialsupervision and monetary policy restraint, on the issue of financial regulation was verified procyclicality. The results showed that China’s banking capital constraintswill strengthen the asymmetric effect of monetary policy transmission. To resolve theconflict between monetary policy and financial regulation, we should let monetarypolicy and financial supervision coordination.