The Regional Effects Of Monetary Policy Based On Money Channel And Credit Channel

Monetary policy plays a key role in the coordinating and orderly development for the national economy, and the difference between regional economies will lead to different effects of unite monetary policy in various areas, namely the regional effects of monetary policy. In the study of monetary policy, regional effects is a realistic subject worthy of attention, especially in China, as the level of regional economic development imbalances are quite notable at present. Thus to study the regional effect and its mechanism has a guiding role to the healthy development of regional economy and the coordination of monetary policy.This thesis attempts to study from two aspects, both the existence and causes of the regional effects of monetary policy in China were considered. The 31 provinces, autonomous regions and municipalities directly under the central government in China can be divided into three regional features, the East, the Middle and the West area. Using the cointegration relationship test and Granger causality test methods to test variable sequences, structural vector autoregression models are set up. The impulse response function is solved out of SVAR model, then use it to inspect the dynamic responses of variables representing regional economies to one unit shock of monetary policy respectively, and successfully proves that there exists a significant regional effects in China. To be specific, the developed area has a higher degree of response to monetary policy, and compared to earlier literature, the conclusion refer to the west area has been different. Afterwards I used the structural break to divide the period into two and examined the regional effects respectively to conclude that regional effect changes over time. In the pre western-development-policy period and after western-development-policy period, the West area presents different sensitivity on regional effects of monetary policy, which explains the above results.Based on money channel and credit channel, this thesis attempts to explain the reason of regional effects of monetary policy. The results showed that both the money channel and credit channel have some explanatory power. In the money channel, three industries have markedly difference on the sensitivity of the interest rate, and the regional industry structures of the three areas have significant differences, which in turn led to the regional effects of monetary policy. This thesis uses the regional credit level as the proxy variable of the credit channel, the differences of responses for credit level in three areas to one positive pulse of monetary policy indicate the existence of credit channel.