The Comparative Study On The Effectiveness Of Chinese Monetary Policy Transmission Channel Based On The FAVAR Model

The effectiveness of monetary policy implementation plays a key role in the development and progress of the country. To formulate monetary policy into force, the process is very complex and diverse which makes transmission of monetary policy may contains many uncertainties. Nowadays China is playing a more important roles in the world with deepen degree of internationalization and increasingly complex of world situations. While in the domestic,however, the economy is at an important period of transition in which we need effectiveness macro-control and guidance to achieve the goal. Under this situation, the study of effectiveness of different transmission channel of monetary policy is very meaningful.The thesis is divided into five chapters and the specific content of each chapter is as follows:The first chapter is the introduction. First introduce the implementation and effectiveness of the monetary policy from the date of reform and opening till now,secondly, introduce the domestic and international situations we are facing nowadays,lastly, introduce the process and existing achievements of the area in the foreign and domestic issues, also indicate the weak point of the the thesis.The second chapter is about the basic theory related to monetary policy transmission channel. Firstly, introduces the basic elements of monetary policy transmission and the relationship between the various elements, secondly introduces the basic theory of each transmission channel.The third chapter is about the empirical analysis. We select 80 variables with monthly date from January 2010 to December 2015 and comparatively analysis the influence of interest rate, money supply, stock indices and bank loan on the macroeconomic based on FAVAR model.The fourth chapter is a comparative analysis. According to the model results in the third chapter, analyze comparatively of the various transmission channels on theeffect of economic growth and price stability.The fifth chapter is the analysis of effectiveness of the monetary transmission channel and recommendations, summarized the effects and problems of each transmission channel, analyze reasons for problems and put forward policy recommendations for the problems.The research shows that China’s interest rate transmission mechanism is not fully functional. It do has a certain impact on the macroeconomic but not very obvious which mainly due to interest rate reform has not been completed and the bank’s management system inefficient.Asset price transmission mechanism has not yet formed. Mainly because the stock market did not create a good investment environment and the market is in a smaller scale, so it cannot play the wealth effect and investment effect. In conclusion the stock market has no significant impact on macroeconomic. Money supply and bank loans mechanisms make an obvious effect,where bank loans is more effective and has become the major transmission channels in currently China. According to the model results and the actual situation of our country, we put forward recommendations to improve and optimize the main transmission channels and are as follows: Accelerate the process of marketization of interest rates. Eliminate barriers to money markets and capital markets. Change from“demand” side to "supply" side and actively cooperate in response to the reform on the supply side of market.