An Empirical Analysis Of The Regional Effect Of China's Monetary Policy Based On VAR Model

Monetary policy refers to a package of system-ruled economic goals which is achieved by the monetary authority that apply monetary tools to some certain variables during a given time. The traditional monetary policy pay more attention to the connected macro economic influences instead of the spatial disparity.Especially in China, the regional difference caused out-off-balance economic development, if the characteristics of regional inconsistency were ignored,not only the policy effect would be diluted,but also the macro goals.Given the above elements,including regional disparity into monetary policy research is practical and significant.Firstly, the paper reviewed the effects of region-oriented monetary policy and related literature, summarized the current research situation against the regional effects of monetary policy. The monetary policy in regional effect can be divided into two categories: the theoretical analysis and the empirical analysis, by which we may have a explicit depict of the related effects, thus a solid foundation would be laid for further analysis.Secondly, through the analysis of the realistic performance and transmission mechanism of monetary policy in China, proving that China's monetary policy has regional effect; Thirdly, based on the theoryof the transmission mechanism of monetary policy, choosing monetary transmission sequence— "actual Loans-real GDP-price index" —to construct the 31-provincial-level VAR model and impulse response function(IRF),respectively analysising the reasons and existence of regional monetary policy from the first quarter of 2008 to the third quarter of 2015.Finally, putting forward suggestions to reduce the regional differences of China's monetary policy based on the empirical test and foreign experience.Conclusion:(1) Different provincial units in China have different effects on monetary policy;(2) The effect of monetary policy is the result of the multi-party participation;(3) With provincial unit on transmission effect of monetary policy, the western regions are relatively poor than others. The author thinks there are mainly two reasons responsible for the results, on the one hand, structural differences exist in the financial system with provincial unit, on the other hand, dissimilarity appears in micro entity with provincial unit.