Research On The Regional Effect Of Chinese Monetary Policy

As an effective macro-control means, monetary policy plays a decisive role inreducing the economic fluctuation and adjusting the economic operation. The creditchannel is the main monetary policy transmission channel, and the behaviors of involvedmicroscopic subjects which are the commercial banks, enterprises and residents directlydetermine the policy effect. However, different regions have remarkable differences inthe banking system, the enterprises structure and the income and consumption ofresidents consumption, which weakens the effect of monetary policy. Therefore,analyzing the regional effect of China’s monetary policy through the credit channel issignificant to improve the effectiveness of monetary policy and promote the coordinateddevelopment of economy.This article classifies and summarizes the domestic and foreign literature on theregional effect of monetary policy through three aspects including the proof of existence,influence factors and policy suggestions. At the same time, it introduces the theory ofoptimum currency areas, the transmission channel theory and the relevant views ofnew and after keynesianism. Then this paper analyses the differences in the bank system,enterprises and residents among different regions, and describes how they influence theeffect of monetary policy. Next through dividing our country into eastern, central,western and northeast four major areas, the paper constructs a VAR model to test theexistence of regional effects of monetary policy in China. Finally, according to theregional differences of micro subjects, the paper puts forward some specific policyproposals,mainly includes two aspects: one is using the regional differentiation monetarypolicy tools; the other one is optimizing the banking system, the enterprise structure andthe consumer behavior to decreasing the regional differences of monetary policytransmission.This article unifying the related literature at home and abroad, analyzes the mainfactors affecting the regional effects of monetary policy from a more novel angle, andposes that differences in the regional banking system, enterprise structure and the reside-nts behavior among regions are the major causes of regional effect.Then the paper innovatively proposes that we should take distinct deposit reserverate in different financial institutions, attempt to conduct different discount rate,strengthen the local commercial banks and rural credit cooperatives system, constantly cultivate the regional medium and small sized enterprises. In addition, this paper alsoadvises that except perfecting the social security system, we should also constantlyimprove the consumer credit system, promote the upgrading of consumption structure.