The Research About The Impact Of Shadow Banking On The Effectiveness Of Monetary Policy In China

The sub-prime crisis caused by the securitization of sub-prime credit asset makes people aware of the significant impact of shadow banking on the operation of global economy. A number of studies have demonstrated that shadow banking challenges the effectiveness of monetary policy,especially through credit channel, because it has the credit intermediary activities similar to traditional commercial banking.In this paper, I classify shadow banking into two types, securitization-based shadow banking and loan-based shadow banking, according to the different mechanisms that impact the effectiveness of monetary policy through credit channel. And the mechanisms are also analyzed respectively in this paper. Different from developed countries, like America and Europe, there is not securitization-based shadow banking which can create liquidity in China. Therefore, it is loan-based shadow banking that impact the effectiveness of monetary policy through credit channel in our country. In the latter analysis, this paper concentrate its efforts on the loan-based shadow banking in our country, including define its statistical caliber, calculate the scale and examine whether it impacts the effectiveness of monetary policy through credit channel.For loan-based shadow banking, the replacement of loan-based shadow banking credit with traditional commercial banking credit plays a key role in impacting the effectiveness of monetary policy through credit channel. In order to examine whether loan-based shadow banking impacts the effectiveness of monetary policy through credit channel, this paper constructs a proxy variable of credit channel---mix and uses the vector error correction model, on the one hand to examine whether loan-based shadow banking credit is the perfect replacement with traditional commercial banking credit, on the other hand to examine the effectiveness of monetary policy through credit channel which includes loan-based shadow banking. The broader credit channel including loan-based shadow banking puts loan-based shadow banking on the same level as traditional commercial banking, and brings it into the transmission process of credit channel. The empirical results show that loan-based shadow banking credit is not the perfect replacement with traditional commercial banking credit in China, and the credit channel of monetary policy which includes loan-based shadow banking is still effective, that is, the credit channel of monetary policy in China is still effective even if considering the influence of shadow banking.The train of thought which brings loan-based shadow banking into the transmission process of credit channel in this paper provides new directions to the supervision of loan-based shadow banking in our country. In addition, in the last part of this paper, I offer some proposals about improving the monetary policy system from the angle of loan-based shadow banking, as well as ensuring the sound development of securitization-based shadow banking.