The Impact Of Banks’ Financial Condition On Credit Channel Of Monetary Policy

Under the background of economic globalization, the impact of changes in monetary policy on China’s financial and economic development increases. Monetary policy is becoming effective measures to implement macro-control of the central bank. This article contributes to a detailed analysis of the macroeconomic situation for the clarity of the monetary policy transmission channels and the transmission mechanism. The bank is also an important part of our financial institutions, so it is useful to make a comprehensive analysis of the monetary policy transmission path, and select the credit transmission of monetary policy leading channels, in order to the in-depth study of the influence of China’s monetary policy transmission channels on bank’s financial condition. This article explores the relationship between banks’ financial situation, monetary policy and the credit transmission channels. It is of great help to let monetary authorities to make corresponding policy adjustments based on the specific environment of the real economy, to achieve the effectiveness of monetary policy simultaneously.The article builds credit indicator system of monetary policy transmission channels from the macro and micro economic level, and adds covering a large percentage of the bank’s financial condition factor indicators in the characterization of Chinese macroeconomic factors, then uses them to test the importance of the financial position of banks in monetary policy transmission. Firstly, this article analyzes the effectiveness of monetary policy transmission channels of credit, points out the environment of our country’s monetary credit transmission, and the current domestic advantages for monetary credit, and then makes comments to improve our current credit rationing. Then, the article builds the bank-the real economy mathematical model to analyze the impact of the bank lending channel to monetary policy transmission, and explores the monetary policy transmission path under the variance of the discount rate, RRR and bank loans. Furthermore, this article analyzes the influence mode and impact strength of monetary policy on bank credit diffusion mechanism transmission channel through the construction of FAVAR model, uses factor analysis abstracts out four macroeconomic factors from38macroeconomic variables which reacts China’s macroeconomic, the four factors are changes in the economic cycle, motivation of import and export, dynamic change of inflation and the amount of credit respectively. Next, this article expresses banks’ financial condition by bank liquidity ratio and capital level, and analyzes the presence of dynamic correlation between them in OLS regression and model building of SVAR. The fourth step, works out the impulse response figure between macroeconomic factors and bank financial condition factor, and in-depth analysis of the actual role between the various macro-economic factors and the banks’ financial position.This article concludes that environment of the credit transmission channel is the existence of banks’indirect financing advantages, alternative low gearing and obviously credit rationing phenomenon. By building OLS and SVAR model, this article analyzes the positive facilitating role of banks’financial condition factor to China’s macroeconomic. Finally, this article proposes policy recommendations to improve the financial position of banks and raise the efficiency of the monetary policy transmission basing on the results above. And also proposes the necessary measures to address the unsmooth problem in credit transmission channel. That are appropriate corrective suggestions to optimize banking operation, deepen banking reform and sound credit system, which commits to synchronize the development pace of banks’financial condition and monetary policy, enhances our credit transfer efficiency and improves China’s social credit system.Topics on monetary policy transmission channels of credit are not new. But the article conducts innovation on research methods and objects. Firstly, this article innovates in the methodological. Integrating the characterization of the financial position of banks micro data with macro data reflects the economic situation of China by building the model, clearing the influence of banks" financial position to the monetary policy credit transmission channels, detailed analysis the credit channel on the macro and micro levels. Secondly, this article is about the innovation of the content, of course, this article is to study on credit channels. But more specifically, this article mainly evaluates the importance of the banks’financial position during credit conduction of monetary policy, and analyzes the fluctuations of monetary policy through changes in the financial position of banks’ factors. In other words, researches on the macroeconomic impact results of the financial position of the bank-specific response, in order to clearing the influence degree done to monetary policy. At last, analyzing specific response cycle through impulse response.