Effectiveness Of China’s Monetary Policy And Analysis Of Taylor Rule Application

In recent years, the people’s bank of China has been continuously expanded several times deposit interest rate floating space, accelerate the process of China’s interest rate marketization. Commercial Banks can be according to own actual situation, in a broader range of autonomous determine its deposit rates, that financial main body independent pricing further liberalisation. However, this does not show that China’s interest rate marketization has been completed. Market-oriented interest rate refers to the body in the financial markets in the policy under the guidance of the benchmark interest rate, according to the demand of the market condition completely independent pricing, financial self-sufficiency. Today, China’s benchmark interest rate policy is not determined by the market, and there is no significant correlation between different interest rates, is executed by the people’s bank of the "double track" interest rate policy, not according to the behavior characteristics of marketization of interest rate to determine the benchmark interest rate. Still more administrative composition control behavior. Lift the ceiling on deposit interest rates is important step in the process of interest rate marketization, does not represent the end of the marketization of interest rate. Interest rate marketization in China is still a long way to go. Interest rate marketization reform is still an important content of economic reform. Therefore, in this situation, to further study the behavior of China’s market-oriented interest rate rules, can provides a strong theoretical basis for deepening the reform of interest rate marketization.As the Reformation of Interest Rates Liberalization in China, the research of applicing Taylor Rules in chinese money market has been widely underatken. In recent years, although Chinese scholars on the research of the Taylor rule has been more comprehensive, the conclusion still exist a certain contradiction.Literature research mainly uses the Chinese interbanl interest rate,which been highly marketization as the research object to discuss the applicability of Taylor rule in China. Ping Xie and Xing Luo (2002), Jianguo Wang (2006), Zhicun Bian (2006) argues that China’s market-oriented interest rates follow the Taylor rule, but monetary policy reaction function is not stable, may lead to economic divergence. Jinwen Zhao, Jitao Fan (2007), Guozhong Yang (2009), Yaping Xu (2009) with more advanced econometric model of the conclusion on the contrary, think that China’s market-oriented interest rate not only can be modeled, Taylor rule and monetary policy reaction function is stable.The conflicting conclusions of these researchhes reflects two aspects of problem. First of all, the applicability of the Taylor rule in China, is whether the Chinese market equilibrium interest rate can be described as stable form of Taylor rule. Second, how to evaluate China’s current "double track" the effectiveness of the interest rate policy. The nature of the Taylor rule has good stability, if China’s benchmark interest rate policy is not in conformity with the Taylor rule in some form, then China’s current interest rate policy may not be optimal, or is not effective. But the problem is that China’s interest rate policy must conform to the Taylor rule? Conflicting conclusions in the literature research shows that, in fact, the previous literature research is not well solve the problem of the two levels.Therefore, by combing of policy evolution rules of pulse fall found that Taylor rule was formed after summarizing the advantages of past policies a both long and short term adjustment of operational policy rules. Articles in Clarda et al. (1999) and Mr Woodford (2003) on the basis of the study, the utility function, commodity market hypothesis and price stickiness monopolistic competition together, form a simple linear new Keynesian model, using optimization method is proved that the optimal policy rules Taylor rule, and the comparison on the actual data of China Taylor rule and other rules of policy effect on the stability of China’s economy. Then, in view of the literature research highlight of the output gap in the measurement and data processing method, using the method of state space model and rational expectations, to test the applicability of the Taylor rule in China. However, the conclusion is still adopted by the problems of interbank lending rates. But didn’t get very good solve. As a result, choose according to this problem, China’s benchmark interest rate policy, credit interest rates, as the research object, to China’s monetary policy to judge the effective interest rate policy. The main research conclusion is as follows:1. Taylor rule is monetary policy in practice gradually formed, can both long and short term policy adjustment, and can effectively buffer stochastic shocks on economic impact. If the empirical test shows that policy form of benchmark interest rates to meet Taylor rule, indicates the effective monetary policy. This conclusion can provide meaningful for China’s market-oriented interest rate reform.2. China’s interest rate policy to enforce the "double track". So, evaluate the efficacy of the China’s interest rate policy can only be based on China’s actual credit interest rate as the research object, rather than in the interbank interest rates in China with the highest degree of marketization as the research object. The conflicting conclusions in the literature research the reason is that the object of study of confusion.3. The empirical test form of Taylor rule, often suffer the output gap measurement problem. It shows the trend of decomposition in the sense of the output gap to replace the output gap theoretically inspection Taylor rule form when there is a theory of "trap". The problem is in literature did not notice. Trend of decomposition in the sense of the output gap is, in fact, economic immediately shock formation, in theory do not related with the interest rate, so should be treated carefully, using trend decomposition in the sense of the output gap inspection Taylor rule conclusion.4. Influenced by the output gap measurement problem, this paper argues that doesn’t give a actual credit form of Taylor rule in China. China’s actual credit interest rates which are obtained by measurement inspection form of Taylor rule, in theory, does not mean that China’s actual credit form of whether to follow the Taylor rule, by the same token, the empirical test negative actual credit rate form of Taylor rule in China, also cannot fundamentally deny China’s actual credit may follow the Taylor rule form. So the evaluation of the effectiveness of China’s interest rate policy "double-track" standard Taylor rule will not be used.5. The evaluation of China’s monetary policy (including interest rate policy of "double track") the effectiveness of the most concise way, is the mechanism of the empirical test of the role of monetary policy. This article use the impulse response analysis empirical test the effectiveness of monetary policy in China, the results show that China’s monetary policy can effectively promote the growth of economic stability, the requirements of the goal is to meet the present stage of China’s economy effective economic policy.