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Efficiency of China's monetary policy

Author: ZhangTongXin LiQuanGen From: www.yourpaper.net Posted: 2010-01-09 09:54:16 Read:
Abstract: The monetary policy as China's economic macro-control means of the development of China's economic health has a major role in recent years, the effect of monetary policy implementation is unsatisfactory, the high efficiency of monetary policy, the monetary policy transmission mechanism is damaged, a variety of reasons, must analyze the efficiency of monetary policy, monetary policy transmission is blocked proposed specific measures to improve the efficiency of China's monetary policy.
Keywords: monetary policy measures of efficiency obstacles conduction mechanism

The transmission mechanism of monetary policy in China is an important means of monetary policy to achieve efficiency, have an important role in China's economic development. Analysis and Research of China's monetary policy is not efficient, conduction delay, to explore specific measures to improve the efficiency of China's monetary policy is of great significance in promoting China's economic and financial health development.

First, China's monetary policy is not efficient barrier analysis

(A) affect the efficiency of China's monetary policy institutional barriers
The efficiency of China's monetary policy institutional barriers, can be understood as policy transmission mechanism is blocked. The increase in the money supply does not only depend on the central bank's willingness and behavior, and the behavior of commercial banks in the conduction mechanism, the degree of development of the money market as well as the constraints of the economic system, will have a greater impact. First, the monopoly of the four commercial banks and non-profit constraint behavior is an important factor to affect the smooth transmission mechanism role. Secondly, can not, as a developed market economy countries, the regulation of base money through open market operations, mainly because the central bank's bond holdings of treasury bonds and policy financial bonds held by state-owned commercial banks disproportionate circulation less the number of treasury bonds and policy financial bonds, the state-owned commercial banks hold large amounts of government bonds to government bonds as high-quality assets and reluctant to sell, open market operations the basis of a lack of transactions, and thus the base money has not been a significant impact ; once again, the role of central bank loans as the main channel base money has disappeared.

(B) affect the operation of the efficiency of China's monetary policy obstacles
Securities market financing to accelerate to weaken the the loan currency policy role.
A long time, the central bank's monetary policy does not fully take into account the capital markets, in particular the role of the securities market, which reduces the efficiency of monetary policy. Capital market, especially the rapid growth of the securities market, had a significant impact on two aspects of the financial operation. First, enterprises direct financing from the stock market on a large scale the weaker funding mechanism of the supply of bank credit; Second, a large number of residents cash flowing into the stock market, residents' financial assets securitization trend strengthen, the virtual capital appreciation or depreciation of the actual change of the total funds of the society as a whole amount and structure, the monetary policies to regulate the the macro supply of funds more difficult, the increase in the uncertainty of the effects of policies, monetary policy is not efficient.
The securities pledged multiplier enlarge, weaken the role of monetary policy.
Securities available proprietary share for pledge financing from commercial banks, within the specified range, the higher the pledge rate, the more loans obtained from banks, loans become stock repledged loans, and so on ad infinitum, the securities market funds supply multiplied by the multiplier effect, shows that the bank credit funds and stocks combined with each other as well as the transformation and expansion of the virtual capital of the security of the funds and the stock market means that banks should become the central bank to formulate monetary policy when considering the issue. Since the monetary policy transmission to the magnification of the results generated by the securities market better money market as predictable, especially the brokerage effect of stock-secured loans with rose capital virtual value-added common effective and collateral loans multiplier and capital virtual expansion is difficult to estimate the extent, which makes the increase in the money supply is no longer comply with the willingness of the monetary policy, the central bank through the base currency regulation undoubtedly increase the difficulty of the whole society of monetary aggregates, the efficiency of monetary policy have been significantly affected.
3, the development of the financial derivatives market, the conduction of monetary policy can not be underestimated.
Financial derivative instruments consist primarily of financial long-term, financial futures, financial options, financial swaps four major categories. Financial derivatives can be stripped out of the traditional financial market risk, reduce the risk of traditional financial markets, financial derivatives have a leverage effect. Therefore, the development of the financial derivatives market is bound to make the expansion of the money stock range, thus increasing the money supply, the main body and the money supply endogeneity, these weakened the monetary authorities control over the money supply to some extent. Coupled with the financial derivatives market can attract a large number of speculative currency is likely to result in currency trading in the structure of demand, preventive and speculative demand for money transformed into each other, so that changes in the money demand function is not clear. In addition, the financial derivatives market may also affect the speed of the flow of money. China's financial derivatives market started late, primarily offering certain scale foreign exchange futures and issued two special forms of financial options, such as convertible bonds and warrants. Although the financial derivatives market in China is smaller, but the impact of the implementation of monetary policy can not be ignored.

(C) The impact of the economic efficiency of China's monetary policy obstacles
China's macroeconomic performance has bid farewell to the era of shortage economy, led to widespread consumer demand is not the emergence of a buyer's market, product oversupply and production capacity idle status. Meanwhile, Asia and the world financial fluctuations, uneven economic development of the neighboring countries and regions, and had a greater adverse impact on the Chinese economy. Coupled with the deepening reform of investment system, enterprises to invest in the main risk awareness has been enhanced investment market constraints also been strengthened. The current enterprise investment funds than loose, but the interest rate is low, not high prices, increased unemployment and laid-off workers, the investment cost is relatively low, but the enterprise is difficult to choose the direction of investment, lack of confidence in the investment income is expected to. After considering the costs, benefits, and risk factors, the amount of investment growth is not significant. While investment demand substantial recovery, but this is largely due to the impetus of the executive power. National budgetary funds increased by more than 24%, driven by domestic loans increased by more than 13%, the investment demand driven by this administrative role in boosting economic growth in the short term is strong. But compared to the multiplier effect of investment demand should have also a far cry. Statistics show that: from 2004 to 2007, investment in fixed assets of China's GDP growth elasticity coefficient is zero O.789 that investment in fixed assets for each increase of one percentage point to spur GDP growth by 0.789 percentage points. Investment demand this multiplier effect, could also contribute to the development of related industries, to create a large number of employment opportunities. But due to changes in the economic environment in 2005, formed the investment expansion constraints, expressed an interest in investing in the amount of the contribution to economic growth rate greatly reduced the efficiency of the implementation of monetary policy is greatly diminished.

(D) financial barriers affect the efficiency of China's monetary policy
1, the central bank's ability to control money supply is severely disrupted.
The central bank's asset composition due to environmental change, leading the central bank to expand limited the ability of the monetary base. First, the base currency change investment channels, inhibition of the regulation of the central bank money supply. The central bank put the base currency of channels, including the net foreign assets of deposit money banks claims, the government claims, the current Youyi foreign exchange and commercial banks re-lending the main channel. Various forms of foreign capital inflows caused by the imbalance between supply and demand in the foreign exchange market, resulting in large RMB appreciation pressure on the central bank base money passively double money supply, the monetary base is formed through the spin-off effect, which kind of economic impact. In the case of the money supply by the central bank through the foreign exchange market to buy foreign exchange, the central bank is difficult to grasp the base currency to invest in, making it difficult to carry out structural adjustments to monetary policy, the inflow of foreign capital will make the central bank to control the money supply structure weakened the initiative. Operational relationships of bank funds flow, and inhibit the regulation of central bank money supply. Reluctant to expand because commercial banks are facing enormous pressure to improve asset quality, while the poor business conditions, the increased risk of loans and lending, the central bank increased lending again difficult. Due to the monetary policy transmission part of a block, the central bank put the base currency failed to effectively enter the production sector and increase the money supply. Loans from financial institutions rebounded in 2005, corporate deposits has failed to rebound corresponding corporate deposits less than the same period in 2004, an increase of more than 2000 billion. According to the analysis, this sector funding is likely due to the the enterprise flow to the non-bank financial institutions. At the same time, in 2005, the monthly annual monetary liquidity decreased, indicating that more funds precipitation.
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