The Research On The Regional Effects Of Monetary Policy In China Based On The Perspective Of Financial Structure

Monetary policy is an indispensable total amount control measure ofmacroeconomic regulation. The assumption of monetary policy implementation is theregional homogeneity. China’s regional development, especially the financial structureconflicts with the assumption. However, People’s Bank of China has not to takeuncoordinated factors like regional economic development and financial structure intoconsideration, adopted a national unified monetary policy. This monetary policy oftenlead to existing different conduction effects between different regions. The paper basedon the perspective of regional financial structure difference to explain the existence ofregional effect of monetary policy.According to People’s Bank of China issued the "China Regional FinancialPerformance Report",31provinces will be divided into four regions: the eastern, central,western and northeast. The paper firstly summarizes the existing researches of regionaleffects of monetary policy, reviewing and combing the theory of financial structure andmonetary neutral dispute, this three parts respectively provides empirical support,research perspectives and research premise.Monetary policy is through multiple links and channel effects on the real economy.The monetary policy transmission mechanism is the core content of monetary policy.Through the analysis of the monetary policy transmission theories, we can draw abasic conclusion: monetary policy transmission mechanism is based on certain financialstructure. Therefore,from the perspective of regional financial structure difference andthe monetary policy transmission as bridge, to analyzes the role of financial structure(the structure of financial institutions, financial market structures and financialinstruments (assets) structure)in the monetary policy transmission process. Thus intheory, we concluded that the regional financial structure differences lead to regionaleffects of monetary policy.Select the money supply (M2) as a proxy variable for monetary policy. Accordingto the regulations of "People’s Bank of China Law", China’s monetary policy objectiveis to maintain the stability of currency and thereby promote economic growth. Thus,Selection of real GDP and the GDP deflator represent the output effect and price effectof monetary policy. Then, we chooses this appropriate variables, using VEC model andimpulse response function to analysis the regional effects of monetary policy. Conclusions show that the existence of the regional effects of monetary policy. Thelargest of monetary policy’s output effect and price effect is the east, followed by thecentral and northeast, the last to the west. Monetary policy in promoting economicgrowth and price stability between the two goals is facing a dilemma. However, regionaldifferences in extent of price effect of monetary policy is less than the output effect. Inorder to further empirical analysis regional financial difference on the influence of theregional effects of monetary policy. The index system of financial structure is dividedinto structure of financial institutions, financial market structure and financialinstruments (assets) structure index three secondary indexes. Then, we continue tosubdivided into eight sub indexes. In addition to the capital market scale index, theremaining seven indexes has significant correlation with the average output response.At the end of the article, in the base of regional financial structure differences,proposed the suggestions on narrowing the regional effects of monetary policy. The keyis optimizing regional financial structure, however, the difference of regional financialstructure is difficult to overcome in the short term. In order to improve the effect ofmonetary policy, the government should implement differentiated monetary policy toolsand strengthen the role of central bank branch. Enhancing the effectiveness of monetarypolicy to make it play a better role of macro-control and promote the coordinateddevelopment of regional economy.