The Transmission Channel Of China's Lending Facility Policy And Its Impact On Manufacturing Investment

In early 2013 and September 2014,the People's Bank of China created Standing Lending Facility and Medium-term Lending Facility that can provide low-cost liquidity to financial institutions.The objective of these lending facility policies includes taking into account the overall stability and structural abundance of liquidity in financial market,restraining the fluctuation of interest rate in financial market,guiding the total growth and partial supplement of credit in financial market,and reducing the capital cost of social financing,as well as promoting the development of real economy and the adjustment of industrial structure.At present,there are a few systematic researches on the lending facility policy,but almost no researches on the transmission channel of the lending facility policy and its impact on manufacturing investment.Therefore,this thesis intends to study this subject through theoretical research and empirical analysis,so as to reveal the implementation effect of lending facility policy and provide corresponding reference suggestions.First of all,this thesis introduces the UK's FLS,the euro zone's TLTRO and the US's TSLF from 4 aspects: the background,the concept and main content,the operation mechanism,the incentive mechanism.This thesis defines Standing Lending Facility and Medium-term Lending Facility from 3 aspects—the background,the concept and main content,the operation mechanism,summarizes the transmission channels of lending facility policy focusing on the interest rate channel,the credit channel and the monetary channel.This thesis also constructs an investment model of lending facility policy affecting the real economy investment in order to show the operation mechanism and transmission channels of the policy.Next,this thesis compares the monetary base of open-market option,the Shanghai interbank offered rate,the RMB loan balance of financial institutions,the money supply,manufacturing investment with the monetary base and the refinancing rate of lending facility policy,to show the implementation of lending facility policy.Then,in order to effectively reduce the incoherence of segmented research,this thesis puts five variables into an SVAR model to study,namely,lending facility policy,interest rate,money supply,credit and manufacturing investment.They are successively tested by ADF unit root test,Johansen cointegration test,Granger causality test,AR root test,impulse response function and variance decomposition.There are three main empirical results: 1.When increasing lending facility policy,the interest rate will surely decrease,the money supply will increase,while the low interest rate will increase the credit,and vice versa;2.The adjustment to the money supply lending facility policy makes is slightly stronger than that of the interest rate,which shows lending facility policy has both the price control and the quantity control functions,but the price control ability is slightly weaker than the capacity of quantity control;3.lending facility policy can effectively promote the investment in rubber manufacturing industry and petroleum nuclear fuel processing industry through the interest rate channel,the investment in tobacco manufacturing industry,agricultural and sideline food processing industry,culture,education,sports and entertainment goods manufacturing industry and metal products industry through the monetary channel,and the investment in professional equipment manufacturing industry through the credit channel.Finally,through the comparison with Unconventional monetary policy of Europe and America,as well as the theoretical research and empirical analysis of China's lending facility policy,this thesis lists three conclusions,which are: first,lending facility policy can effectively affect related variables of financial market;second,the transmission channel of lending facility policy is effective;third,lending facility policy can affect the investment of some manufacturing industries.At the same time,this chapter also lists four recommendations: first,we should increase the transparency of lending facility policy;second,we should increase the incentive mechanism of lending facility policy;third,we should strengthen the ability of lending facility policy to regulate interest rates and credit;fourth,we should set the collateral rules of lending facility policy with flexibility.