Abstract

Industrial restructuring has been plagued China’s economy in recent years. The world’s economic development experience has shown that the successfully and quickly industrial structure transformation is one of the most important conditions for China to step into high-income countries from middle-income country. Therefore, transition countries all over the world, including China, try their best to adjust the layout of the industrial structure, optimize the industrial structure, and improve the quality and efficiency of economic growth, to maintain a sustained, rapid and healthy economic growth. Monetary policies adjust the industrial growth and industrial structure by regulates the sources and composition of each industry funds, and then arranges the formation of assets and production capacity in industrial structure. Empirical results in China show that the monetary contractions reduce output by more than monetary expansions raise it.

Is the effect of monetary policy consistent with previous findings, when we focus output on the industry level? In our paper, we investigate three specific relationships between the monetary supply shocks and industrial growth base on the directions of monetary supply shocks, the regimes of monetary supply shocks and industrial growth. First, we focus on the effect of positive and negative money supply on industrial growth and test the asymmetric effect. The empirical results show that negative money supply has more significant and sensitive effect on industrial growth than positive money supply, while the size of the effect is different between three industries, the response of secondary industry is strongest, followed by the tertiary industry, and the minimum is the primary industry. The asymmetric tests do not support the existence of the asymmetry effect of money supply shock on industry growth.

Second, we investigate the relationship between (in) active money supply shocks and industrial growth. The active regime of money supply shocks were shown to have a statistically significant effect on industrial growth, whereas the effect of inactive shocks is undoubtedly weaker and probably statistically insignificant. In our opinion, we should avoid frequently usage of active money policy to stimulate industrial structure transformation, since the significant effect could not be superimposed.

Third, we detect the response of different regimes of industrial growth to money supply shock. The empirical results show that the primary industry has a significant response to money supply shocks in its high-growth regime. The secondary industry has a significant response in both high-growth and low-growth regime. While the monetary effect to the tertiary industry growth is not significant in both regimes. For the size of the effect, the response of high-growth regime in the primary industry and the tertiary industry are much larger than the response in low-growth regime. The asymmetric test results show that the effect of monetary policy on industrial restructuring not only need to consider the impact of positive and negative monetary shock, but also need to consider the regime of industrial growth, and then we can achieve industrial structural adjustment with properly monetary policy.

Finally, we analyzed the direct relationship between the monetary policy and the evolution of industrial structure. The empirical results show that the moderate expansionary monetary policy has contribution to the adjustment of industrial structure, and the “spillover effect” would be persistent and decay slowly. The negative money supply has significant positive effect on the evolution of industrial structure, and the active money supply has larger effect on the evolution of industrial structure than inactive money supply. All in all, the implementation of tight monetary policy in active money supply regime has a significant impact on the evolution of industrial structure.

Key words

Money Supply; Industry Growth; Industrial Restructuring 

        DOI: https://doi.org/10.19616/j.cnki.bmj.2013.06.003