Effects of financial frictions, heterogeneity of property rights and various monetary policy instruments

ZHAN Minghua1,2 XU Jieling2 WANG Shilei3

(1.School of Finance, Guangdong University of Foreign Studies 310018)
(2.School of Economics and Management, Zhejiang Sci-Tech University 310018)
(3.Zhejiang Branch, Communications Bank of China 310000)

【Abstract】In the framework of neoclassical logic, this paper constructed a theoretical model that not only embodies the particularity of China’s economic structure, but also is in line with the mainstream economic logic and can open the “black box” of monetary policy transmission mechanism. Based on this model, the paper analyzed the transmission mechanism and effects of different types of monetary policy instruments in China, and at the same time put forward hypotheses and conducted empirical tests. The findings are as follows: first, the neoclassical logical framework can provide a strong explanation for the transmission of monetary policy in China as long as market imperfection is fully considered;second, serious market imperfection can lead to multiple important policy implications;third, as far as the transmission effect of monetary policy is concerned, interest rate liberalization is far from just implying that loose regulation over prices of financial resources, but rather a systematic project.

【Keywords】 financial frictions; proportion of state-owned investment; types of monetary policy instruments;


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(Translated by XU Zhou)


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This Article


CN: 11-1166/F

Vol 37, No. 07, Pages 64-78

July 2016


Article Outline



  • 1 Introduction
  • 2 Literature review
  • 4 Validation of Hypothesis 1
  • 5 Validation of Hypothesis 2
  • 6 Conclusion and policy implication
  • References