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China Monetary Policy Exchange Rate Transmission Channel Research

Author: DengQingQing
Tutor: ZhengPing
School: Southwestern University of Finance and Economics
Course: Finance
Keywords: Monetary policy transmission mechanism Exchange rate Price level Economic growth Error correction model
CLC: F822.0;F832.6
Type: Master's thesis
Year: 2009
Downloads: 300
Quote: 0
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Abstract

First, the main content of this paper since the reform and opening up, the rapid economic development. Most of the time, monetary policy has played a positive role. Monetary policy in China is showing non-neutral. In this context, the role path of the study of monetary policy on the real economy, the monetary policy transmission mechanism that has significance. Monetary policy transmission mechanism is the pulse generated by the central bank signal changes due to the process of economic knock-on effect of the mediating variables, and eventually cause the changes in the way of real economic variables. Study monetary policy transmission mechanism, it is necessary to improve the effectiveness of monetary policy and reduce the role of monetary policy delay. Monetary policy transmission mechanism is mainly divided into the monetary channel and the credit channel. Gradually emphasis on macroeconomic indirect role in the process of China's market-oriented reforms, but the non-equilibrium credit rationing phenomenon still exists. Money market and capital market development is not sufficient, all kinds of enterprises are very high dependence on banks, non-market of interest rate formation mechanism, causing the conduction of the monetary policy of the central bank in the money and capital markets is limited. So far the credit channel is still the dominant way of monetary policy transmission. With the improvement in the level of China's financial markets, credit pathway should only be used as an auxiliary transmission mechanism, the credit means alone is difficult to stir up the important task of the monetary policy transmission mechanism. In the short term, the improvement of China's monetary policy transmission mechanism should focus on to make credit conversion of approach to the equilibrium credit rationing. The long run, should pay attention to the interest rates, exchange rates pathways. The exchange rates of monetary policy pathway to enhance the effectiveness of monetary policy are: first, to broaden the role of monetary policy channels; Second, to reduce the monetary policy transmission delay. Literature study on China's monetary policy transmission mechanism, mainly focused on the discussion of the closed economy. With China's economic openness and continuously improve the RMB exchange rate formation mechanism and constantly improve the monetary policy of our country is facing an increasingly open design environment, there is a growing scholars started to pay attention to the exchange rate of the monetary policy transmission mechanism. Most of which are discussed in the overall monetary policy pathways involved in this, but few do specialized research literature on exchange rate pathway. Perhaps it is because a long time, our policy is a peg to the dollar exchange rate formation mechanism. However, from July 2005, the RMB exchange rate formation mechanism reform, the RMB exchange rate flexibility is greatly enhanced, although they are still subject to government influence, but the purpose of economic development trends, the exchange rate formation mechanism sooner or later will increasingly more flexible, increasing the exchange rate is floating. As long as the existence of this trend, we can not ignore the role of the exchange rate. And, as long as the exchange rate policy is not intended to be limited to a fixed exchange rate, we can use the exchange rate adjustment to the service of our economy. In this paper, the theoretical basis of a comprehensive set forth the exchange rates of monetary policy conduction pathway of the use of co-entire test, causality test, vector error correction model, recursive VAR model, impulse response and variance decomposition and other measurement methods, on China from 1996 to 2008, the exchange rate pathway empirical analysis. The results show that the impact of monetary policy on the exchange rate is significant, but the impact of exchange rates on prices and output is not very significant. Then analyzed the situation in the United States, based on comparative analysis of China and the United States. The United States has long been a very open country: free floating exchange rate, the interest rate market, the free movement of capital. And the United States is China's largest trading nation. So the research can give some of our valuable inspiration. Finally, analysis of the application of exchange rate pathways, including a pathway on the exchange rate and the relevant policy recommendations. Second, the structure of the second chapter of the pathway various aspects of the theoretical basis of the exchange rates of monetary policy. First, a simple analysis of the effectiveness of monetary policy and the situation in China. Because the effectiveness of monetary policy is to study monetary policy pathway prerequisite. In making monetary policy after the conclusion of China, began to study the theoretical basis of the exchange rates of monetary policy pathway. Comprehensive views of a variety of school, a detailed study of the influence of currency exchange rates, the theoretical basis of the exchange rate affect the price level and output. No theoretical basis for the empirical research, can only be castles in the air, that is, no matter how high the coefficient of determination, goodness-of-fit, which concluded no sense. Among them, combing the basis of the general theory, combined with the actual situation in China was amended and deepen. Chapter pathway exchange rate of China's monetary policy conducted a comprehensive empirical analysis. Can only say that there is a qualitative result only from the second chapter of the theoretical analysis, such as to conclude: influential. If it is not quantitative analysis, there was no from the analysis. Because only from theory not be able to make it clear that monetary policy exchange rate between the two countries pathway differences. Therefore, it is very necessary based on the theory, the empirical analysis. That part of the main empirical research methods: cointegration analysis and causality test, vector error correction model, recursive VAR model. In examining every aspect, in accordance with their specific theoretical basis to select the appropriate econometric methods, in order to better analyze the size of the long-term relationship and interaction between the various time series. In particular, study the impact of monetary policy on the exchange rate used is the vector error correction model; study the impact of the exchange rate on the price level, because the more the assistance of variables involved, so a recursive VAR model; exchange rate in the study on the production of the impact, first build the error correction model, then under Chapter II constructed a theoretical model to calculate the average impact of exchange rate changes on output. The conclusion of the second link of the exchange rate of the Chinese currency policy pathway, namely the impact of exchange rates on prices and output is not very significant. But the exchange rate of the output gap but there is a significant impact. In other words, for the goal of price stability and economic growth of China's monetary policy, exchange rates of monetary policy in China pathway is not smooth. However, some scholars have put forward the goal of monetary policy to price stability and the output gap currently being discussed more inflation pegged system. If inflation pegged to the implementation of such a system should be more concerned about the exchange rates of monetary policy pathway. Chapter IV, with the analysis of the situation in the United States, based on the contrast between China and the United States to further study the exchange rate of the Chinese currency policy pathway, and further to explore Chapter empirical analysis conclusion. Which the impact of the exchange rate of the U.S. monetary policy empirical research. For the second link, because some data can not be found and research many do empirical research, but a direct reference to the conclusions of scholars. This chapter three aspects of Sino-US comparative analysis of exchange rates of monetary policy pathway. The price of exchange rate pass-through effect in the contrast between the two, from a microscopic foundation to start to explore the reasons for the inconsistency of the two exchange rate pass-through effect on the market structure, the level of industry, pricing. Different influence and position in the international context because of their currencies, the growth effect of exchange rates of the two different growth effect in the contrast between the two exchange rates. Chapter V, on the conclusion of the preceding analysis, and to explore the reasons for the analysis of the application of the exchange rates of monetary policy in China pathway. First, the analysis of the the previously empirical analysis and comparison analysis concluded. From the empirical results, the smooth flow of pathway inadequate level of China's exchange rate. Found in a comparative analysis of the process with the United States, China's rate pathway with the United States there is a big difference, so as to give some inspiration to the policy recommendations of the later. Secondly, from the ultimate goal of monetary policy describes the role of the exchange rate pathway, which combines realistic analysis of both the exchange rates of monetary policy pathway will function from the response to demand shocks and supply shocks. Third, from the analysis of the exchange rate pathway the other pathway complement and co-ordination of monetary policy to explore the role of the exchange rate pathway. Finally, the pathway the effectiveness of policy recommendations to improve the exchange rate, among other things, improve the RMB exchange rate formation mechanism, to re-examine the intermediate target of monetary policy determined to improve the structure of import and export commodities market and enhance the international status of the yuan. Third, the contribution to the writing of this article is the author of the summary and distillation of the the Master study period study and research, reflecting the direction of the two-and-a-half years of theoretical research and insights. Papers views the lineage and extension of the existing views. And from a particular point of view, reading books and materials to summarize, draw their own thoughts and opinions. First, combing the theoretical basis of the exchange rates of monetary policy pathway gives a full theoretical analysis. Introduction of the exchange rate in currency exchange rates pathways price pass-through effect, compared to the previous basis, in addition to the impact of exchange rate on the balance of payments, while taking into account the impact of exchange rates on monetary policy another target - the price level. Comprehensive empirical analysis of monetary policy, exchange rate pathway. Second, the exchange rate pass-theory is introduced into the exchange rates of monetary policy pathways study, which began to pay attention to the exchange rate of the monetary policy pathway microscopic foundation. Third, the use of a comparative analysis method to analyze the case of developed countries, the United States. Because the United States is basically market-oriented interest rates and the exchange rate, the free movement of capital, so there is some reference for the reform of China's exchange rate pathway. In the process of comparative analysis, deeper analysis of the situation in China.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Exchange rate,foreign financial relations
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