What role do financial markets play in monetary policy?

"Monetary policy" in the classification and role of economic policy

To put it simply, the financial market has four major functions: 1. Financing 2. Regulation 3. Risk aversion 4. Signal.

1. The financial market can quickly and effectively guide the reasonable flow of funds and improve the efficiency of capital allocation.

2 Financial markets have a pricing function, and fluctuations and changes in financial markets** are a barometer of economic activity.

3. The financial market provides conditions for the financial management department to carry out indirect financial regulation and control.

4 The development of financial markets can promote innovation in financial instruments.

5 Financial markets help to achieve risk diversification and risk transfer.

6 Financial markets can reduce the cost of searching for transactions and the cost of information.

The basic role of the financial market: the first is discovery, that is, trading and pricing; The second is to provide liquidity, which can be sold and liquidated at any time; The third is to reduce transaction costs, reducing transaction costs is competition, the more competition, the thinner the benefit.

After the competition in the financial market, the transaction costs have indeed been reduced, the original bank life is very good, the deposit and loan interest rate spread used to be about 4%, as long as the deposit is pulled in, and then lent out, add a three or four points of interest rate difference, the bank life has been very good in the past ten years, but now it is not good.

There is competition between banks, there is competition in the capital market, the bond market is developing, and if the interest rate on bank loans is too high, people will not borrow from you. Spreads are getting thinner, so it's hard for the banks.

Now the spreads of these big banks are also around. If the interest rate spread of large banks is one basis point, it is one ten-thousandth, and if the deposit and loan interest rate spread is one ten-thousandth basis point**, how much less will the profit of large banks be in a year? Two billion.

One in 10,000, that's 200 million. So if it is more than 20 basis points, the profits of these big banks will be nearly 40 billion less, which is the competitive market.

So now commercial banks have transformed and done a lot of service business and capital market docking. This is a good thing for the whole society, reducing transaction costs.

The capital market is divided into two parts, one ** vote and one creditor's right. There are many problems in China's market, but the history of China's capital market is still short.

From 1991, the establishment of the Shanghai Stock Exchange and the Shenzhen Stock Exchange to the present, less than 30 years. Compared with developed countries, it does take a short time, and it will take time to solve the problem of short duration.

The United States is also slowly purifying, and the United States now seems to have a tight system and strict supervision, which was not like this before.

In the twenties of the last century, the U.S. capital market had been developing for more than 100 years, and it was not good. Then there was a bubble and a financial crisis.

In the 20s, listed companies in the United States issued **, and they did not even disclose their financial statements. A company on Wall Street is going to sell **, you want to buy it, I want to show you the ledger, it won't let you see it, you love to buy it or not. There is no obligation to disclose, and there is no regulation, and in the end something goes wrong.

After the problem occurred, a US Securities and Exchange Commission was created to manage it. The first chairman of the CSRC was Kennedy's father, and the elder Roosevelt appointed him, and the market was in an uproar at that time, saying that this person was a bad guy, a notorious jaw on the entire Wall Street, and manipulated **, how can you make him the chairman of the SFC?

That's where Americans are smart. Roosevelt said: Because he is a bad guy, so if you let him be the chairman now, let him make the rules, he knows best how to catch the bad guys, and the rules he makes are very targeted. That's really the case, he manages the market very well.

Influencing monetary policy.

The factors that play a role include three points: 1. The monetary policy time lag refers to the time required from the need to formulate a policy to the final acquisition of the main policy or all the policy effects; 2. The velocity of money circulation; 3. Micro subject expectations.

countervailing effect.

1.Time lag factor.

The so-called time lag refers to the objective need to formulate a certain policy to the impact of this policy on economic activities according to the actual economic situation.

The expected effect of the collapse is fully manifested in the time it takes for the collapse to manifest itself, which consists of two parts: the internal time lag and the external time delay. Internal time lag refers to the need for ** banks from changes in the economic and financial situation.

The process from the time the policy action is taken to the actual action of the bank. The external time lag refers to the period from the date of monetary policy action taken by the bank to the time when it has a sufficient impact on economic activity.

2.Expected factors.

Expectations are the expectations that people make with all the information available to them. This expectation is justified because it is an expectation that is made after careful consideration with reference to the relevant knowledge provided in history. The theory of rational expectations is different from Keynes and Friedman.

The theory of expectations.

Measurement of the effectiveness of monetary policy.

The effectiveness of monetary policy can be measured in two ways. First, from the quantitative aspect, it is used to measure the size of the role of monetary policy, that is, the quantitative effect of monetary policy; Second, from the aspect of time, it is used to analyze the speed of monetary policy, that is, the time effect of monetary policy.

Measuring the effectiveness of monetary policy is to analyze and measure the effectiveness of monetary policy in solving social and economic problems, and how long it takes for this effect to be manifested after the policy is implemented.

The measurement of the quantitative effect of monetary policy is a very important aspect, which is related to the impact of monetary policy on the national economy.

The scale of the final impact. Generally speaking, the quantitative effect of monetary policy is measured mainly by analyzing and comparing the gap between the effect achieved by the implemented monetary policy and the expected goal. Taking the implementation of the target as an example, this paper illustrates how to measure the quantitative effectiveness of monetary policy.

What are the important roles of financial markets in economic development?

A: The financial market is very important for the normal operation and development of the economy. Its functions are mainly as follows:

Medium effect. The financial market can adjust the surplus and shortage of funds and improve the efficiency of the use of funds. It promotes the mobilization of funds between surplus units and deficit units, thereby realizing the transformation from savings to investment at the macro level, and making the aggregate supply and demand of society tend to be balanced.

Accumulation. It can continue to grow from short to long, accumulate small amounts, create conditions for the accumulation and expansion of funds, and thus be conducive to the development of social reproduction.

Regulatory effect. Financial markets are able to use market forces to allocate funds efficiently, so that the allocation of real resources can be optimal. It is of great significance for regulating the ratio of accumulation to consumption, and to regulating the ratio of productive investment to non-productive investment.

Conduction. On the one hand, the financial market can reflect the deep-seated situation of economic operation through the changes of various financial indicators, and provide signals for market economic activities; On the other hand, because it can effectively affect the supply and demand of funds, it provides a way for economic regulation and control, and can achieve timely and reasonable weekly control of the macroeconomy through operations in the financial market.

Financial markets play a decisive role in economic development.

The financial market is the indispensable foundation on which the monetary policy transmission of the bank depends. The development of a country's financial market determines the macroeconomic control methods, control tools and control effects of the first bank. If the financial market is underdeveloped, there are few tradable financial instruments, and the scale of financial products is small, then the best banks can only adopt more direct regulation and control methods and means to achieve the expected results.

On the contrary, if the financial market is developed and the amount of tradable financial products is large and varied, then the choice of bank regulation methods and means is larger, and indirect regulation and control methods can be used more.

Financial institutions are the main body of the financial market, but also the object (object) of the bank's macroeconomic control, it is the bridge connecting the bank and other economic entities, in fact, the bank's macroeconomic regulation and control is through the use of various monetary policy tools, directly or indirectly adjust the excess reserves of the financial institutions, in order to control the credit creation capacity of the financial institutions, and then regulate the money supply. Therefore, whether the behavior of financial institutions is standardized and whether they respond sensitively to the signals sent by the first bank directly determines the effect of the first bank's regulation.