Research on the Effect of Financial Innovation Upon Transmission Mechanism of Monetary Policy in China
|School||Tianjin University of Finance and Economics|
|Keywords||financial innovation monetary policy Transmission mechanism of monetary policy|
Contemporary financial innovation originated in 1960’s, since 1980’s,a new globe-sweeping stage of accelerated development of financial innovation has come. In order to meet the needs the requirements of the development of financial and economic, every country made a series financial innovation. Financial innovation has brought profound changes to world finance and economy, but also brought about severe shock to it and put forward a new challenge to the government’s macro regulation and control. Furthermore, monetary policy is one of the most important economic policies and an important means of macro-control, so monetary policy will inevitably be affected by financial innovation.In China, since the reform and opening-up, especially with the gradual establishing of the market economic system and an open and competitive pressure, financial innovations have developed very rapidly. The behavior of holding cash, asset selection, investment and financing and transaction settlement of various economic entities are deeply changed, which produces a profound impact on the money supply and demand, also on the tools, intermediate targets and transmission mechanism of monetary policy. Transmission mechanism of monetary policy, as the basis of effectiveness of monetary policy, describes how policy affects real economy and the path on which it depends. The smooth transmission mechanism of monetary policy directly decides the degree of the ultimate goal for achieving, so the impact of China’s financial innovation on monetary policy transmission mechanism is worth further studying. Various transmission mechanisms of monetary policy are established and developed under the background of the economy marketization and financial deepening in China, which based on the conditions of the innovation of financial institutions, financial markets and financial product. The role of every transmission mechanisms of monetary policy is changed in the course of the development of financial innovation.By using the econometric methods such as cointegration test, Granger causality test, the effect of the interest rate transmission mechanism, the credit transmission mechanism, the asset price transmission mechanism in China under the situation of financial innovation is analyzed and concluded, which is verified that the credit transmission mechanism still occupies a dominant position in China, the asset price transmission mechanism is more obvious currently. Effect of the interest rate transmission mechanism is not shown due to the financial innovation in China which is still at an early stage in the economic environment. Therefore, for the purpose of keeping the smooth of the credit transmission mechanism and the asset price transmission mechanism, enhancing the effectiveness of the interest rate transmission mechanism, we should timely adjust instruments and intermediate targets of the monetary policy according to the financial environment in China, strengthen and improve financial market conditions and accelerate the process of rate market-oriented.