Research On The Inflation Targeting And It's Adaptability In Our Country

Inflation Targeting(IT) is a new monetary policy framework in the early 1990s.It means that the central bank, government or both announce a targeting inflation rate, promise to keep low and stable inflation in one or some future periods, and announce clearly that realizing the targeting inflation rate is the only, overriding goal of monetary policy. The framework gives central bank high power cameras choice to select and operate monetary policy tools. To avoid Time Inconsistency and get the credibility of monetary policy, transparency and accountability are additional features and requirements of IT. Severe inflationary pressures, collapse of exchange rate stability, the failures of money supply targeting and frequent outbreak of the financial crisis, have made many countries and regions abandon their traditional monetary policy frameworks and switch to IT. Through empirical analysis between six IT countries and three non-IT countries, we can found that the IT countries can reduce their inflation rate and escape volatility of interest rates and output gap the effectively.As far as China is concerned, the effectiveness of money supply targeting becomes worse, our macroeconomic violate between inflation and deflation, and both of them bring new challenge of traditional monetary policy framework. At present, our macroeconomic and financial are stable, the independence and transparency of our central bank have noticeably increased, and the single targeting dollar exchange rate system has changed, so we get the basic conditions to introduce IT. But in view of the inflation forecasting capacity and efficiency of the monetary policy transmission difficulties, we can only adopt ITL first and set l%-5% as our targeting inflation rate. At the same time, further enhancing the transparency of monetary policy and central bank independence, speeding the exchange rate system and the interest rate mercerization reform to clear the monetary policy transmission channels inflation, are key supporting measures of adopting IT.