The credit channel of monetary polity transmission: An advisable transmission mechanism for China

In recent years a growing consensus has emerged for the effects of monetary policy to real output. However, several monetary policy transmission mechanisms act through different channels in parallel, and which channel can carry out the best efficacy discussed by economists. This paper reviews the mainstream standpoint, of monetary policy transmission mechanism: interest rates channel and credit channel. By analysis of Chinese empirical data we found the impact of interest rate channel is indistinct and credit channel could play a more important role in present China.