Research On The Inflation Targeting And It's Adaptability In Our Country

Since 1990s, inflation targeting regimes have been adopted by a growing number of central banks in industrial and emerging economies, as a new monetary framework to conduct their monetary policy. With the comparative advantages, the performance of inflation targeting regimes has been quite good. Inflation targeting countries have significantly reduced both the rate of inflation and inflation expectation, stabilized the growth of output, overcome the problem of time-inconsistency, thus increasing the credibility of monetary policy.In this connection, we wonder whether the inflation targeting regime can improve the macroeconomic performance of a nation, whether there is a correlation between inflation targeting regimes and the decrease of inflation rate, and other economics variables, whether there exists some commons and differences across these different inflation targeting countries. In addition, what kind of prerequisites on economic and institutional aspects are needed for the adoption of inflation targeting regimes, how to design the monetary policy framework etc. are our concerns in this paper.This paper, based on the monetary policy frameworks of inflation targeting regimes, firstly by a comparison of design of target standard and institutional elements of inflation targeting frameworks, found that there are different characteristics on the target positions, target horizons, target measures, the accountability and independence of central bank, and the use of monetary operational tools across countries.Secondly, by a comparison of actual and targeted inflation outcomes, we found that target misses is a common things, which shows the flexibility of inflation targeting regime,in particular, which to some extent, allows deviations from inflation target,and gives central bank more room to react to the large shock.Furthermore, this paper attempts to measure the effects of inflation targeting on macroeconomic performance. By measuring a number of emerging economies targeters compared to nontargeters, we found that economic performance varies greatly across individual countries but with the evidence that inflation targeting improves performance as measured by the behavior of inflation, output etc.. By test the prerequisites of inflation targeting regimes, it suggests that the institutional and economic elements are not critical, but contributes to the success of the inflation targeting regimes.Finally, from the prospective of institutional and economic aspects, it analyses the daptability of inflation targeting regimes in China, and suggests that inflation targeting regime is a better choice of China's monetary policy in future. Now what we should do is try to enhance the independence of People's Bank of China, deepen the reform of banking system, improve financial system, develop financial market,construct the statistical indicators system to increase the inflation forecasting ability, and strengthen the transparency and accountability of PBC.