Mr. Sun will try to establish a new research framework to analyze the monetary policy transmission mechanism. In this field, previous research has usually assumed that the banking sector would completely transmit the purpose of the central bank to the real sector, thus paying attention to the channels from the banking sector to the real sector. Because the transmission of monetary policy in the banking sector is the most important part of deciding the effectiveness of monetary policy, this research focuses on the transmission mechanism of monetary policy from the central bank to the banking sector. The concept of ?cushion storage reserve? was created by Mr. Sun and was introduced to this framework to analyze the comparison of reserve supply and reserve demand. Based on this concept and a related main formula, commercial banks? behaviors were divided into three reactive approaches -- sterilize, forbear, and adjust. According to the different kinds of reactions, monetary policy has different effects. This new analyzing framework makes the analysis of monetary policy operation more concise and effective. At the end of his paper, Mr. Sun will try to use this approach to explain the present monetary situation of China and Japan.
Lunch will be provided for those who RSVP by 3/29/04.