A Study On The Selection Of Monetary Policy Criteria In China

The goals of monetary policy are achieved through operation of the monetary policy instruments by the monetary authorities. The concrete result of the monetary policy is closely related to its operation mode. If so, how on earth could the monetary authorities draft the monetary policy operation mode to approach the monetary policy goal more effectively? In other words, how should the monetary authorities make and implement the monetary policy and improve the validity of the monetary policy? This is the standardization of the monetary policy this paper deals with. It has been officially proposed to transit to the socialist market economy system since 1992, China has gradually strengthened its role in macro adjustments and controls of the monetary policy. The normal choice about monetary policy has been a central issue discussed all the time. Today the economy is still in transformation period in China. Therefore, what kind of operation criteria of monetary policy is more suitable for the actual situation of China is a subject worthy to study conscientiously.What kind of operation criteria of monetary policy should be followed has been a classical proposition in the domain of monetary economics all the time. This paper is based on a two-way approach of theory and practice, and conducts a research on fundamental definitions which lead to relevant conclusions ultimately. The basic procedure of this research herein starts from basic definitions of monetary policy, monetary policy goal and monetary policy criteria, describing the two kinds of opposite views about the norm of monetary policy theoretically -- Rules VS Discretion (--Between dispute go on it describe). It follows up with pointing out the disadvantages of each operation criterion which could not be overcome by itself. From the practical points of view, countries all over the world are more and more inclined to combine the advantage way of the two now, for it is most effectively evidenced in practice by the inflation goal. Then, given China's reality, this paper reviews the four phases of monetary policy in China, and concludes that both Rules VS Discretion is not fit for the domestic situation of China. Finally, it discusses their applicability in China by considering inflation goal mechanism which is widely adopted in the world.This paper consists of five parts as follows:The basic concepts of this paper are discussed in the preface altogether.Chapter one is about Rules versus discretion. It aims at sorting out the development of"rules versus discretion"and carries on a brief review. This chapter consists of three parts, namely, an introduction of the two basic contents, limitations and disadvantages, and the details of the evolution battle of the two and essence of disputation. It concludes with author's own opinions.Chapter two introduces the Inflation Targeting and practice in various countries. This chapter is made up of three parts, namely, a detailed discussion on Inflation Targeting and its pros and cons, an introduction to the practice of this system in western developed countries, and the current status of this system.Chapter three is about the monetary policy practice in China, and it is comprised of two parts. The first part is a brief review of the four phases of China's monetary policy in the past, while the second part points out the inapplicability of simple standardized monetary policy and the discretion policy in China.Chapter four conducts an analytical discussion of the applicability of inflation goal system in China. This chapter is composed of four parts as follows: the analysis of adoption conditions of this system, the analysis of the applicability of inflation goal system in developing countries, the applicability analysis of such system in China in view of China's domestic situation, and further emphasis on the applicable conditions and opportunities for China to adopt such system in practice.