Analysis On The Region Effects Of Monetary Policy In China

Since last three decades, our country’s economy has experienced rapid development and made great achievements. Many researchers have turned their attention to the regional development gaps. In addition to the difference of local advantages and natural resources between developed regions and less developed regions, the differences in each areas’ economic structure and regional financial environment are more and more significant. This can result in different effects of united monetary policy on different regions. So the execution of monetary policy could not narrow down the growth gaps among different regions, and may have the opposite effect. So it is of great practical value to study the region effect of our country’s monetary policy.In my thesis, firstly the theories of monetary policy transmission mechanism are reviewed. Then based on further analysis of the key influencing factors of interest rate channel and credit channel, this paper lead to the conclusion that monetary channel is the main channel for monetary policy transmission in China.In the second part, this paper classified our country into four regions, and test the existence of regional effects by applying Granger causality test, the VAR model and impulse response function, using quarterly data of sample regions. The empirical analysis confirms the effect of regional effect, and shows that output effect and price effect behave differently in each area.The third part analyzes the cause of the existence of regional effect of our country’s monetary policy and offers some suggestions to solve the problem of regional effect.