The Impact Of Financial Opening On The Output Effect And Price Effect Of Monetary Policy

Financial openness is a core link in China’s opening up to the outside world and an important indicator for examining China’s openness to the outside world.Since the reform and opening up,China’s opening up to the outside world has gradually expanded,the scale of foreign trade has grown steadily,and the proportion of foreign investment in total national investment has been expanding.These are the progress China has made in opening up to the outside world.However,objectively speaking,China’s opening up in the financial sector is still not very significant,and foreign capital is still unable to hold 100% of its core businesses such as banks and securities.Although the implementation of QFII and QDII systems,allowing foreign central banks,international financial organizations,international financial organizations,sovereign wealth funds to use the renminbi investment in the inter-bank market,the launch of Shanghai-Hong Kong Stock Connect,Shenzhen-Hong Kong Stock Connect to establish internal and external capital market interconnection mechanism.But China’s foreign exchange controls are still very serious.At the same time,interest rate liberalization and exchange rate marketization have not kept pace with economic growth.There is still a long way to go before the road to full financial openness.The incomplete opening of finance also has its corresponding advantages,especially when the central bank adopts the corresponding monetary policy,its effect will be more significant,but once the financial realization is open,the effectiveness of the central bank’s monetary policy may face severe challenges.Therefore,this paper mainly studies whether the effectiveness of China’s monetary policy is affected once the financial opening up is gradually expanded.In the usual related research,scholars usually reflect changes in monetary policy through changes in currency and interest rates.These methods are in theory.It is indeed feasible,but in practice,the central bank’s purpose of issuing additional currency is to allow these currencies to flow into the private sector and promote the development of the real economy,rather than just staying in the bank and reflecting the important indicators of whether money flows into the real economy.It is a change in the total RMB loan of the society.As we all know,the implementation of monetary policy requires a certain transmission channel.The article on national conditions,the current Chinese monetary policy is mainly through the credit channel to preach.However,whether these conclusions are suitable for this paper is open to question.Therefore,based on the predecessor theory,this paper first tests whether the monetary channel or the credit channel can reflect the implementation effect of monetary policy through the VAR method.After empirical analysis,this paper uses bank credit changes to represent changes in monetary policy,and examines its impact on output and inflation in the context of financial openness.This paper refers to Karras(1999)based on the output growth rate and inflation model established under the open economy,and uses the macro data of China from 2002 to 2018 to draw the following conclusions: 1.With the increase in financial openness,the output effect and price effect of the monetary policy credit channel have gradually weakened.2.Although the increase in financial openness has weakened both the output effect and the price effect of the monetary policy credit channel,the effect of this weakening effect is not very strong,especially for the output effect.This result has a high degree of credibility after a corresponding measurement test.