The Transparency Of Monetary Policy And The Empirical Study Of China

Central Banks held on the operative principal of secrecy all the time. Instead of announcing the information, such as the goal of monetary policy, preference for the policy and models based on which decision made, definitely, they would choose to carry out the policy in official words. All that hindered the effective communication and interaction between the monetary authority and the public, even made a block for the public to form the true understanding and expectation on the applied monetary policy, which led to the deviation of the monetary policy executive result from the expected outcome purchased by the government and the unstable economic operation, also the decline of the social welfare. Hence, at the beginning of 1990s, some central banks who suffered from the secrecy started to set off a reform wave of open and transparency on the monetary policy. Consequently, improving the transparency of monetary policy became a new world trend and a hot topic after the independency did.China a developing country, often implements monetary policy as a requisite policy tool for the authority's macro-economic control.In fact, rising of the policy's transparency can improve the policy's executive effect. Based on the above truth, research on China's transparency of the monetary policy has its practical significance. Thus, the paper studies the transparency from three angles:Firstly, discussion of the theory of monetary policy transparency in details, covering the background of the rise of transparency; definition of monetary policy transparency (both in the narrow and broad senses) and introduction of the theories to support the transparency of monetary policy. All the above is the theoretical basis for further research.The second part of the article, we studies several major central banks'experience on the transparency of monetary policy abroad, such as the Federal Reserve, Bank of England, European Central Bank, to explore, analyze their systems of improving the transparency of monetary policy, which has directive significance for China.The third part is the focus of this article. In the first, the paper studies the PBC experiences to improve monetary policy transparency, both for the beginning and the development. Then the paper uses multiple empirical methods, such as revised E&G index, dynamic transparency index and market expectations index, to do a comprehensive assessment of Chinese transparency of monetary policy. For E&G index, taking the existence of its targets set by repetitive into account, it is necessary to amend the indexes accordingly, combining the existing monetary policy framework in China. Subsequently according to China's monetary policy transparency in all aspects of the practice, the paper studies the situation for two periods(before and after 1995) based on the modified method of E&G index, then explores the changes in the transparency of two-phase. For dynamic transparency index, the paper makes an assessment of the transparency, selecting 7 days central bank bills rate and 7 days the inter-bank bond repo rate from 1999 to 2010, which are the highest degree of market rates. The conclusion is dynamic transparency index of the day when the benchmark interest rate adjusted will fluctuates drastically. Finally, market expectations index, selecting 3 months central bank bills rate,1 day and 7 days inter-bank interest rate, uses the H&R model for an empirical test. For further exploration,, the paper uses VAR model, the impulse response and variance decomposition of the sample data to have a more in-depth analysis.At the end, the author based on the foregoing theoretical support, practical experience and empirical analysis of the results, combining with China's current economic development situation, the paper put forward relevant recommendations for reference, from the target transparency, information transparency and operational transparency, and several other angles respectively.