Analysis on the Influence of Shadow Banking on the Effectiveness of China's Monetary Policy

Abstract

After more than ten years of development, shadow banking has formed a certain scale in China, during this period, the effectiveness of monetary policy to the market economy also promoted; at the same time, the shadow banking has also caused both advantages and disadvantages. In this paper, we exam 141 sets of monthly data from January 2007 to September 2018 explore a better implementation of monetary policy and the status quo of China's shadow banking management. We find that shadow banking and monetary policy have a strong negative relationship in the short term, but the long-term negative correlation is weak but the impact time is long. Keywords—Shadow Banking; Monetary Policy; Effectiveness; VAR model