China's Central Bank Independence, Financial Stability And Its Correlation Study

Central bank is the top financial institution which performs Macro-regulation, holds the financial stability and provides financial service. The independence of the Central Bank refers to the comparative independence extent when it executes currency policy.The researches show, it would not drag back economic growth when enhance the central bank independence while controlling inflation, therefore many countries try to enhance the independence of central bank.But many central banks only have independence on legal base, but not in reality, to which should be paid more attention. At the same time, the impact of enhancing central bank independence upon financial stability is also worthy for further research.This thesis will establish the connection between central bank independence and financial soundness. According to the given measurement of central bank independence, I chose a suitable central bank independence measurement for reforming countries, and People's Bank of China's independence extent has been tested. At the same time, it established the financial soundness evaluation model and measured the financial soundness index of China in several years, which are according to the Financial Soundness Indicator of IMF and the data collection possibility. The weighting of indicator is determined by the Analytical Hierarchy Process. Base on the model of financial soundness evaluation measured the financial soundness index of China in several years. Regression analysis between independence extent of People's Bank of China and financial soundness extent has been implemented. It came to the conclusion: there is a connection between central bank independence and financial soundness, the independence of central bank can promote financial soundness. Further more, it proposed to support to increase central bank independence.