Analysis Of The Taylor Rule's Model Based On The China's Monetary Policy In The Open Economics

There is a large body of economics literature on the rules-versus-discretion debate over monetary policy. The monetary policy established in 1996,which takes currency supply as its medium index, deviates to a great extent from the goal of monetary policy in relativity and independence owing to the influences of the Central Government's exchange policy, the Commercial Banks'demand of profits,the local government's investment impetus and the state-owned enterprises'operating mode. Interest, as a signal of assets'price, is considered, among all the factors that may infuence price and economic development, as the only variant that can maitain a long and stable relationship with price and economic development. Its flexibility, measurability have been increasingly appealing to monetary policy makers.This paper stands in basic theory of the Taylor rules, Especially model with interest-rate smoothing and the exchange rate factors under the conditions of an open economy. Analysis the application of Taylor rules under Chinese opening economy concerning Chinese situation and regime. At the same time , using quarterly data from 1998-2008 to calculate the monetary policy rule values ,by comparing the rule value and the actual value ,the empirical analysis indicates that the Taylor rule fits well to China's monetary policy, it can be a good measure of China's monetary policy. Contrast to the shortcomings of China's current policy on "discretionary", In order to promote the sustained steady and healthy development of China's economy, it is recommended that the discretion-oriented monetary policy operation should be transferred to rule-oriented one as soon as possible.