The Effect Of China's Monetary Policy

Through the establishment of a proper econometrics model, this thesis has used indices to measure the effect of China's monetary policy and how much the monetary policy influence economic growth of China.This study has a great research value today as the authorities choose monetary policy as its main tools to control and regulate economy of China.A study on the effect of monetary policy must base on its intermediate and ultimate goals. According to real background of financial market in China, by the principles of measurability, controllablity, correlation and an Anti-interference, the authorities determine the money supply as the intermediate goal of monetary policy, set "keep currencies stable to promote economic growth" as the ultimate goals of monetary policy.Through the investigation of the interaction between money supply and GDP from 1990 to 2006, this thesis finds that monetary policy had a little effect on economic growth, the effect of monetary policy was low at that period. Due to lack of experience , bad implementation, not enough force and the various conflicts in economy and other reasons, the monetary policy has a low effect in China.In order to improve the effectiveness of monetary policy in the short run, the authorities must choose the most effective monetary policy objectives and tools, while in the long run, institutional reform is the fundamental way. This thesis puts policy recommendations from the systematic reform of monetary policy tools, the process of market-oriented interest rate and improvement of the effectiveness of monetary policy transmission.