Reconsideration About The Choice And Application Of The Media-target Of Our Monetary Policy

Many scholars inland or abroad have been bending themselves to solving the problem how to select a country' s media-target of the monetary policy for a long time. "Our country has formally set variable Ml as the media-target of our monetary policy, and MO together with M2 as the observation target of our monetary policy" (XiaBin, MiuQiang, 2001) . Along with the development of our financial market ,deepening of the marketalization innovation and the entrance of the foreign capital financial organizations, the shortage of taking monetary supply as the media-target has become more and more obvious. In recent years, the truth came out that the effect of the monetary policy had become not as remarkable as before. In order to insure the validity of our monetary policy, the adjustment and modification of the media-target seem to be very urgent. Many domestic scholars have discussed this problem from different angels of view and drawn different conclusions. In my paper, I will integrate theoretic analysis with the actual situation of our country and try to find a proper variable that can be taken as the media-target of our monetary policy to settle the problem.The selection of the media-target of a country' s monetary policy is based on the selection of the ultimate-target and the conduction approach of a country' s monetary policy. So in my paper, I start with the analysis of the ultimate-target and conduction approach of our monetary policy. On the foundation of the basic frame educed from the analysis above, then I analyze the four variables that are viable to be taken as the media-target in our country — inflation rate, interest rate, monetary supply and commercial banks' credit, and draw a conclusion from it that we should still take the monetary supply as our media-target and what we should do is to find the quantitative relationship between the monetarysupply and the ultimate-target of our monetary policy to insure that our monetary policy can be effective. In the following, I discuss the problems that will exist if we insist taking monetary supply as media-target, analyze the reasons that lead to these problems and give some personal proposals respectively. In the last part of my paper, I analyze and offer some modificatory methods in details towards the monetary supply variable, including the modificatory methods towards the statistical index of the basic currency and the statistical index of the monetary supply. Also I present an operating rule of appropriate monetary supply that I think is proper for our country and deduced an optimal operating rule for monetary aggregates. The analysis frame of this monetary rule is based on the analysis framework of the model of Walsh, the premises of which are very similar with the conclusions I draw from the analysis in my paper. I amend the model basing the premises of Walsh and gain two equations, one is for precommitment and one is for inspection afterwards. According to the two equations, I provide a practical reference model for china' s central bank by using actual data and check the model by regressive analysis and the results turn out to be reasonable.