Research On Monetary Policy, Entrepreneur Confidence And Economic Growt

In recent years,China’s economic growth rate has gradually slowed down.Coupled with the impact of the COVID-19 pandemic,entrepreneur confidence has continued to decline,and the stimulative effect of monetary policy has weakened.Traditional macroeconomics,based on rational expectation theory,holds that confidence is not the main reason for causing economic growth in the transmission process of monetary policy.However,monetary authorities still emphasize the role of confidence,especially entrepreneur confidence,in economic development.The reality shows that when entrepreneur confidence is lacking,the implementation effect of the relevant policies formulated by the government to restore the economy will be greatly discounted.In the current situation where "firm confidence and stable expectations" are repeatedly emphasized but entrepreneur confidence continues to decline,studying the mechanism of confidence’s role in the transmission of monetary policy,represented by entrepreneur confidence,is of significant importance to the question of whether measures to stabilize confidence are necessary and how monetary policy should stabilize confidence.Given this,after reviewing the literature on monetary policy,confidence,and economic fluctuations,this article further conducts a Granger causality test on the variables representing monetary policy,entrepreneur confidence,and economic fluctuations.The results show that there is a statistically significant causal relationship between monetary policy,entrepreneur confidence,and economic growth,which supports the correlation between variables.Then,this article constructs a structural vector autoregression model including the above variables.According to the impulse response results of the variables,it is found that the enhancement of entrepreneur confidence is beneficial to economic growth.Expansionary monetary policy will boost entrepreneur confidence and promote economic growth,while implementing contractionary monetary policy will lower the level of economic growth by reducing entrepreneur confidence.This shows that entrepreneur confidence plays a positive role in the transmission mechanism of monetary policy.Subsequently,based on the above analysis results,this article constructs a threesector DSGE model including representative households,firms,and monetary authorities,and embeds entrepreneur confidence into the model to analyze the mechanism by which monetary policy affects economic growth through entrepreneur confidence.By using the impulse response function,the relationship between monetary policy,entrepreneur confidence,and economic growth is analyzed.The research results show that under a positive entrepreneur confidence shock,total output,consumption,investment,and real worker wages show an upward trend.This indicates that the enhancement of entrepreneur confidence is beneficial to economic growth.Under a contractionary monetary policy shock,entrepreneur confidence declines,showing a "negative camel hump" shape,which further leads to a decline in economic variables such as consumption,investment,and output.When the confidence transmission channel is closed,the stimulating effect of monetary policy on macroeconomic variables such as output decreases.At the same time,the sensitivity analysis of the parameters shows that the higher the reaction coefficients of monetary policy and entrepreneur confidence,the more obvious the implementation effect of monetary policy,and the more significant the regulatory role in the macro economy.The research in this paper provides the following enlightenment: Firstly,entrepreneurial confidence plays an important role in the transmission of monetary policy;secondly,the interaction mechanism between the government and micro entities should be improved;thirdly,the monetary authorities should timely express their position when facing severe macroeconomic fluctuations,stabilize market expectations through their own influence,and prevent the spread of panic sentiment.