Analysis Of China's Monetary Policy Operating Strategy And Thinking

There is a large body of economics literature on the rules-versus-discretion debate over monetary policy. The monetary policy theory and empirical research have developed a lot after 1990s.The monetary policy rules combine the operation target and ultimate goal by appropriate means, to reduce the inconsistency of monetary policy and improve the transparency and credibility of monetary policy. Recently, the Federal Reserve's monetary policy through the implementation rules made in regulation of the economy has made great success and the discussion on monetary policy has a rapid escalation. The true meaning of monetary policy began in 1984 when the People's Bank of China exercised the functions of the Central Bank and it improves gradually by reforming monetary policy. Along with the deepening of economic restructuring and raising awareness of the monetary policy, China's monetary policy has shifted to indirect control. In this background, we believe that studying foreign monetary policy to improve the effectiveness of monetary policy would be helpful.This article combines the method of standardized research and empirical research together. It is divided into four chapters:Chapter I :To study on the history and operation strategy of China's monetary policy. This chapter recalls the practice of monetary policy in the first 20 years after the establishment of the Central Bank of China. From the practice of monetary policy from the beginning has gradually explored stage of maturity, the color of alternative selection is strong. It also points out the weaknesses of existing studies and the way trying to improve.Chapter II: To recount the traditional theory and development of operation strategy of monetary policy . In this chapter, it follows as time and recalls the history of alternative selection and follow as rules. Then it introduces the understanding of the evolution and main form of monetary policy rules. ChapterIII:To test on the monetary policy rules . It tests the monetary policy from the perspective of empirical research. First, it uses OLS to test the original forms of Taylor Rule and then takes generalized matrix to estimate the response function of the Central Bank of China. We find some problems by using the results to compare with the practice of developed countries. Further, given the fact that China is actually in the money supply as an intermediate target and the consideration of foreign scholars between Taylor Rule and Maccallum Rule, we rewrite the original rules. We test China's monetary policy history on the premise of generalized Taylor Rule. On the basis of generalized Taylor Rule, we introduce foreign exchange reserves and target share index. We find that it is a better way to explain the monetary policy of China.ChapterIV :To suggest the future monetary policy framework and the direction of reform . This chapter makes several recommendations about the future direction of reform based on the problems found in ChapterIII. These proposals expound from the three aspects: the central bank itself, the coordination of foreign exchange policy and the construction of external economics environment.This article tests the monetary policy and finds the instability of China's monetary policy and it has inherent mechanism for self-fulfillment between inflation and deflation. The operation variables are constrained by foreign exchange policy and less of independency. The conclusion reflects the problems appeared in China's monetary policy. I expect this article could provide reference to the reform of monetary policy in the future.