The Empirical Study of Monetary Transmission Mechanism in China During the Transformed Period
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Abstract:
This paper follows the Cointegration Test and Granger Causality Test based on the Vector Auto-regression Model to estimate the impacts of monetary channel and bank-lending channel on macro-economy respectively and investigates the different effects of the two channels on the latter using the OLS during the 1994 - 2002 sample period in which the monetary policy was transformed from being directly-controlled to being indirectly-controlled by the central bank in China. The result shows that the monetary channel and the bank-lending channel are both the important channels of Chinese monetary transmission, while the impact of latter on macro-economy is stronger. So the bank-lending channel plays a dominant role in the monetary transmission in China. Policy implications are made in the conclusion.
