The Choice Of Intermediate Target Of Monetary Policy In China Under Open Economy

Each country sets its monetary policy in order to achieve its ultimate targets. The choice of intermediate target of monetary policy (ITMP) and the achievement of it are directly related to the performance of monetary policy, when the ultimate target of monetary policy has been set. It is a problem that cannot be ignored that changing economic environment will have different influence on ITMP, and finally on the ultimate target. Since the reform and opening-up of China in 1978 and the accession to WTO in December 2001, the openness of China's economy has changed deeply, especially the accession to WTO has a much more obvious impact on it. The research on the effectiveness of the ITMP of money supply and the selection of ITMP under China's open economy will have very important theoretical and practical values on it. This paper will be based on positive and normative analysis, analyzing the factors which have influenced the effectiveness of the ITMP of money supply, and the selection of ITMP under open economy, i.e. interest rates and inflation targeting. In the analysis, I will always run through the relationship between the ultimate goal of monetary policy and ITMP to research the selection issues of ITMP under open economy. From the analysis of the actual situation of China, I believe that interest rates are more suitable for us to be operation target of monetary policy rather than ITMP, and inflation targeting is a relatively optimum choice for the future.