An Empirical Analysis of the Transmission Mechanism of Monetary Policy in China

In theory, the transmission of monetary policy depends on monetary channel or credit channel. But there is controversy on the role of monetary or credit channel in China. This paper makes an empirical analysis on the transmission mechanism of monetary policy from the first quarter of 1994 to the first quarter of 2003 sample period in China by such approach as unit root test, cointegration test, Granger causality test, vector autoregressive model (VAR)etc, to find out the steady relation among M_1,LOAN and GDP as well M_2,LOAN and GDP. The results show that the monetary policy influences the real economy through the monetary channel rather than through credit channel in China at present.