The Empirical Study On The Effectiveness Of China's Monetary Policy

Since the outbreak of the global financial crisis in 2007, China's macro-control policy has made a major adjustment, China has implemented a proactive fiscal policy and loose monetary policy and introduced the 4 trillion investment to expand domestic demand and promote the growth of economic. In this context, the study on monetary policy in response to the financial crisis, to find out the main factors that effect monetary policy through the analysis, and to put forward corresponding policies and measures that make monetary policy effective most, has important practical significance.This article is divided into four parts:The first part is to review the research background and significance of monetary policy, introduce Western theories about the effectiveness of monetary policy, as well as the contents of this structure, and to point out the innovation and deficiencies of this paper.The second part is the focus of this paper, firstly, to point out the two aspects of the effectiveness of monetary policy based on the definition of the effectiveness of monetary policy; Secondly, to analyze the relationship among China's economic growth, Inflation rate and money supply during 1986-2010, on the basis of analysis China's monetary policy practice will be divided into four stages, and the fourth stage of China's monetary policy performance of the global financial crisis is analyzed; Finally, using the Error Correction Model to analyze the relationship among China's monetary policy, economic growth and price index between the long-term and short-term in the context of the global financial crisis, to verify the effectiveness of monetary policy in China.The third part of the analysis puts forward the current impact factor of the effectiveness of monetary policy according to the second part, and is focus on the true that the monetary policy transmission mechanism is not smooth and the problem of excess liquidity in the exchange rate system.The fourth part is to propose policy recommendations to enhance the effectiveness of monetary policy combined with China's current macroeconomic situation and monetary policy, such as accelerating the reform of the marketization of interest rates and the reform of formation mechanism of exchange rate, Improving the financial market system and foreign exchange management, strengthening policy coordination and international coordination and so on, these policy recommendations to improve the effectiveness of monetary policy have important guiding significance.Through the study I found that the reserve instrument is invalid in response to the financial crisis, and the interest rate tool is more efficient in promoting economic growth, but ineffective in maintaining the price stability, so the overall effectiveness of monetary policy in China is not high. Although the interest rate under control and exchange rate in stable have some effect in response to the financial crisis, there are still issues limiting the effectiveness of monetary policy to play such as the incomplete interest rate market and the unperfect market exchange rate formation mechanism. The trend to promote market-oriented interest rate reform and the exchange rate formation mechanism reform, improve efficiency and monetary policy transmission mechanism, increase the flexibility of RMB exchange rate and speed up the pace with the international standards has not changed.