Evolution Of China's Monetary Policy In Open Economy And The Effect Evaluation

Financial crisis, started from 2008, affects every country's money market and entity economy. As an important participant of world economy, China is also shockded, puts up deflation and decline of economy increase rate. the central bank has implemented series of monetary policy to save China's economy. But how does these policy's effects? This paper is to study this problem on the former study basis.First, we analyse the characteristics and trends of the performance of China's monetary policy through known the circumstance of every period's monetary policy, we found that the objectives of monetary policy, tools and the effects of policies at various stages appeared different characteristics. second, we theoretical studied whether the monetary has effects, This is a key part of this article. Before study, first we should know the components of monetary policy, know different choices of monetary policy instruments and its goal, and China's different choices in every period, through analysis, we choosed the variables of empirical studies, namely, M1, M2, GDP and price index, then we study the effects of monetary policy by Mundel-Fleming model, Among these, first we analyzed the static effects of the model, followed by the condition of capital controls, and finally studied the model effects under foreign exchange reserves conditions. Third, we analyse the impact factors of China's monetary policy from the perspective of an open economy, including four areas: changes of monetary policy transmission mechanism, buildup of the endogenous character of money supply, strength of the monetary policy's international spillover effects, as well as the conflict of internal and external balance goals. Finally, we use empirical analysis to examine the real effects of China's monetary policy based on historical data, This is the second focus of this article. First through the vector error correction model ,we proved there is a long-term stable relationship in the four previously mentioned variables, though they are not smooth, and secondly we concretely analyzed the bilateral relations of these four variables by the impulse response curve. through the empirical analysis, we can be sure monetary policy is effective, but because of a number of impact factors, the effects of monetary policy is not very significant.