Abstract

The root of the U.S. financial crisis in 2008 is the financial imbalance characterized by the asset price bubbles and over-expansion in the credit market. But the financial imbalance problem，not only exists in the U.S. economy but in the Chinese economy during the transition period. The crisis in U.S. makes us rethink the role of monetary policy aimed at price stability and economic growth in financial imbalance and even in the financial crisis：on one hand，the monetary policy lacks the ability of regulating and controlling asset price fluctuations；on the other hand，the ex post monetary policy intensifies the financial imbalance. The negative impact of existing monetary policy makes us begin to explore the measures to avoid recurrence of the financial crisis as much as possible.

The crisis in 2008 was fundamentally caused by financial imbalances and the trigger of it was the reversal of housing prices caused by the Fed’s increase in the benchmark interest rate，which subsequently caused sharp fluctuations in the economic aggregate. It is true that the constant accumulation of financial imbalances will eventually be released in a destructive way through the crisis in order to return to the mean. But it is still confused why the reversal of housing prices caused by the adjustment of monetary policy can lead to such a dramatic change of the total economic output. This phenomenon has been called ‘financial accelerator effect of monetary policy transmission’ by Bernanke and Gertler and the formation mechanism of the financial accelerator effect is revealed by the balance sheet mechanism transmitted by monetary policy. However，the forms and channels of money entering the economic system as well as its impacts on the economy may differ under different economic systems. Thus，it is not proper to explain the issues in Chinese transition economy by adopting monetary policy transmission theory established in the mature market economy and it is necessary to research based on the particular economic and financial environment of China.

Firstly，this study analyzes the external environment of monetary policy transmission during the transition period and explains the theoretical logic between the monetary policy transmission mechanism and some special factors in the transition period such as bank-based financial structure，factor price distortions and the yet-to-be-market-oriented interest rate. Secondly，the analysis is carried out the effect of micro-agents’ rational choices on monetary policy within an imperfect credit market. For this purpose，it internalizes the collateral constraint into the portfolio theory model to analyze the effect on the investment behaviours of companies and the allocation of credit funds. Based on this，it further analyzes the linkage between the micro-agents’ rational choices and the macro level effect，aiming to reveal the formation of a financial accelerator effect during the transition period of China. Meanwhile，using the real data and econometric models，it empirically testifies the existence of the monetary policy transmission mechanism in order to provide evidence for theoretical analysis. Thirdly，this research provides a scientific quantitative basis for the reform of the monetary policy framework by establishing the Dynamic stochastic general equilibrium modelling （DSGE model） contained with the financial accelerator effect and using the DSGE model-based policy simulation method to quantify the improved monetary policy adjustment effect. Finally，based on the theoretical and quantitative analyses，this paper presents some policy recommendation for China to improve the effectiveness of monetary policy during the transition period.