A Study On The Effectiveness Of China's Monetary Policy Adjustments

China's macro economy faced a complex situation in the decade from 1998. With the gradual deepening of economic reform, a series of contradictions and problems appeared in economic and social areas, the difficult of macro-control increased, and monetary policy also faced enormous challenges and pressures accordingly. How to evaluate the effectiveness of monetary policy in this period? what role the monetary policy should take faced new economic situation? It requires a deeper understanding of the complex relationships between economy and currency, as well as monetary policy, to answer these questions correctly.This paper reviews the adjustments of China's monetary policy in response to variety economic conditions, analysis the operation environment of monetary policy, the challenges faced, selection of policy tools and their effectiveness, as well as procession of the monetary transmission, in a specific phase of economic transition. Then, test the effectiveness of China's monetary policy using means of quantitative analysis. Finally, propose specific recommend- ations to improve the effectiveness of monetary policy, and make a study on positioning the role of monetary policy at a specific phase of China's economic development.This paper holds that, there is still a large gap between the current operating environment of China's monetary policy and sophisticated market economy's. Thus, the focus of PBC should be creating conditions suit for monetary policy, improve the macro-financial system, strengthen the micro-foundation construction of monetary policy, adjust the operation framework of monetary policy to adapt to the changes in the economic environment, and enhance predictability and scientific of monetary policy. Money is not omnipotent; the implementation of monetary policy should focus on creating the conditions through regulating monetary environment in order to address various economic issues. We should be inclined to"more look and less do"in order to avoid falling into the dilemma for the macroeconomic policy that eliminates the symptoms without curing the disease, the more action the more mistakes. We need a deeper understanding of the limitations of monetary policy, and absorb lessons of this financial crisis that avoid put Monetary policy above on whole macroeconomic policy, while ignoring the coordination with other policy instruments. We can see from this financial crisis that countries represented by the United States couldn't or don't want to adjust the economic structure when faced imbalance in domestic economy, but simply put the burden of balance on the currency. Although the balance was paid out in this way, it is bound to be short-lived and untenable under the economic and financial globalization. There is no universal, rigid monetary policy, and it is required to make arrangements in accordance with economic and financial environment respectively. Monetary policy that too positive may do more harm than good and become the source of economic fluctuations in the long run, This is worthy of our careful consideration. The concern of Monetary policy shouldn't only Limited in the scope of short-term factors such as the current liquidity and inflation, and should extend the sight to medium and long-term in order to achieve a balance between the short term and long-term.