The Entrepreneurs’ Confidence in Monetary Policy Transmission
- ZHANG Chengsi & SUN Yuchen
- School of Finance, Renmin University of China, 100872.
This article investigates the role of confidence in the transmission of Chinese forward-looking monetary policy. We construct an SVAR model that involve the growth rate of monetary supply, entrepreneurs’ confidence, inflation and real economic output, and use the counterfactual simulation to identify the role of confidence in monetary policy transmission. While expanding monetary policy shocks contribute to real output growth, shutting down the confidence channel significantly undermines the stimulation effect of monetary policy. If monetary policy fails to boost entrepreneurs’ confidence, it will be hard to achieve the ultimate goal. Interestingly, the bankers’ confidence index based on the same survey question fails to play an important role in monetary policy transmission. Our results remain robust when alternative measures of monetary policy, the firm's pricing strategy and investment behavior are taken into account.
JEL： E12, E52
- Confidence, Monetary Policy, Counterfactual SVAR