Research On The Skills Of Monetary Policy Adjustment

Monetary policy is a main method of macroeconomy adjustment. The function of monetary policy is to probably achieve the goal through the operational instruments of monetary policy. In order to implement monetary policy, to keep the balance between "tight or loose" and " economy growth or price stability", the policy maker should master advanced skills and apply them well. In other words, the adjustment skills of monetary policy must be improved in China. Based on the theories of monetary policy of western countries and the successful experiences of Federal Reserve Bank of the United States and other countries, this paper focus on the approaches that can affect the monetary policy of China as follows:Firstly, optimal operation rules is the key of effective monetary policy. FRB had abandoned the traditional Random Walk and Simple Rules, but carried out the Neutral Rules to achieve the economy growth and price stability with casual steps. In China, a positive rule which is flexible under the control should be carried out for the time being.Secondly, a relative intermediate target is an important indicator of effective monetary policy. Having abandoned monetary supply as intermediate target, FRB turns to use real interest rate which can keep a long term stable between price and economy growth while some other countries prefer the inflation target regime. The Central Bank in China should locate a reasonable inflation target regime which is based on money supply together with an assistant target system, then turn to real interest rate target at right time.Thirdly, the ahead of time monetary policy will make the policy efficient. It is important for China to better understand the time lag of monetary policy, to use forward-looking monetary policy like FRB, to find sensitive leading indicators, to catch the macroecnomy turning point timely, and to avoid economy fluctuation when something doesn' t prepare well.Fourthly, flexible operation will make double results with half effort. Learning micro adjustment policy and caution attitude from FRB, operating the monetary instruments in a tiny range with a cautious manner, China should keep eyes on confidence control, Window Guidance and public anticipation.Healthy bond market will smooth the transmission mechanism of monetary policy. It is an effective method to achieve the dramatic change of transmission mechanism and improve the efficiency of monetary policy by establishing more effective bond market.