A Theoretical And Econometric Analysis On The Quantity And Price Transition Of Monetary Policy In China

In recent years,with the gradual improvement of China’s economic structure and the continuous development of the financial market,there has been a disagreement between the quantity and price indicators under the traditional adjustment framework of the monetary policy.It is becoming more and more difficult to balance them.Under such circumstance,the question of the comparison and selection of the two sets of regulatory framework on quantitative monetary policy and price-based monetary policy is particularly important.In view of this,this article will start from two dimensions of theoretical analysis and econometric research,and study the control mechanism and regulation effect of quantitative monetary policy and price-based monetary policy.Based on the background of the "new normal" of our economy,we put forward corresponding theoretical support and policy recommendations for the related issues such as quantity and price transformation of monetary policy in the coming period.This paper contains the following six chapters:The first chapter is the introduction part of this article,including the significance and background of topic selection,the theoretical basis,research review and research methods of quantitative and price-based monetary policy.This chapter presents two important monetary policy rules,namely McCallum rule and Taylor rule,and reviews the practical effects and research conclusions on the quantity and price transformation of monetary policy.Both theory and practice show that the quantity and price target of monetary policy is difficult to balance in the long run,and it is necessary to carry out the transition.In the second chapter,based on the model of McCallum rule,empirical tests and analysis of the effectiveness of quantitative monetary policy are conducted from both linear and nonlinear perspectives.The results show that both the output gap and the inflation gap have a reverse impact on the money supply,and the central bank’s regulation of M2 has a good continuity.The results of the STR model test show that before 2000,China’s monetary policy was in a low-lying state,with strong expansion effect,and there was excessive attention to the inflation gap.This phenomenon has eased since 2001.In the third chapter,we empirically test the effect and mechanism of price-based monetarypolicy in China based on Taylor rule.The fitting effect of Taylor rule on Chinese central bank’s policy operations is better than that of McCallum rule,and the central bank’s regulation of interest rates also has obvious smooth characteristics.In the high volatility regime of interest rate,contingent features of monetary policy are relatively strong,with higher attention on inflation rate.In the low volatility regime,the policy follows the Taylor rule and adiusts more smoothly,with relatively more attention on output changes.In addition,the response curves also indicate that there are structural problems in our economy.We need to push forward the supply side structural reform and create conditions for better implementation of price-based monetary policy rules.In the fourth chapter,we use TVP-FA-VAR model to compare the effectiveness of the two monetary policy rules under current economic structure of our country.Through the analysis of main macroeconomic variables in China,we can get the conclusion that the quality and potential of our economy have been improved.Under such circumstance,the advantages of quantitative monetary regulation have gradually become smaller and the selection of intermediary indicators has become more difficult.At the same time,with the liberalization of interest rates,the effectiveness of price-based monetary policies has increased.It is necessary to further promote the quantity and price transformation of monetary policy.The fifth chapter,from the perspective of the dual-track system of interest rate,explained the interest rate characteristics and its effect on the efficiency of monetary policy transmission mechanism.The basic conclusions are as follows: The results show that double interest rate track distorted capital allocation efficiency.Quantitative tools not only regulate the liquidity,but also bear the function of correcting price signals distorted.The decrease in the correlation between the quantity of money and the economic indicators leads to the weakening of the regulation effect of quantitative tools.In addition,the interest rate of planned rail still occupies a dominant position in the regulation of monetary policy,and the marketization of interest rate can improve the effectiveness of the regulation.The reform of interest rate marketization should gradually break the soft budget constraint system and form a price regulation framework based on the market-based benchmark interest rate.The sixth chapter mainly considers the external influence of the open economic environment on monetary policy.By studying and comparing different policy rules through DSGE model estimation,we can obtain that: In the price-based monetary policy,interest rates are most sensitive to changes in inflation,and the response to exchange rates is the weakest.The expected inflation targeting rule is more concerned with inflation,but the implementation effect of the policy is notas pronounced as the forward-looking Taylor rule.What’s more,under the forward-looking Taylor rule,the stability of monetary policy operation is better,and the economic fluctuation is smaller.It can be seen that in the process of policy transformation,it is more appropriate to use forward-looking Taylor rules to regulate macroeconomics.