Under The Open Economy Of The Effectiveness Of Monetary Policy Research

With the deepening of the opening-up and reform policy, China is gradually shifting from a closed economy to an open economy. The effectiveness of monetary policy has a lot of difference in two different environment between in a closed economy and in a open economy environment. The development of open economy opens up a new channel of connecting local currency and foreign currency, and increases the interactive methods between the local currency and foreign currency as well. It also changed the way by which the monetary policy goes into effect. We need only consider the policy about domestic currency in the close economy, while we should harmonize the policy of exchange rate and monetary policy in the open economy . Since the factors which restrict the validity of monetary policy becomes more and more, for the coverage of monetary policy enlarges, the effect of monetary policy becomes vague.The article chooses the effective of Chinese monetary policy in the open economy as a intention. It researches that how does Chinese monetary policy stabilize the price and promote the economic growth under the external influence of the flowage of the capital, the system of the exchange rate, and the reserve of the foreign exchange as well.The article divides 5 parts. The first part is summary. It introduces the background and the purpose of the article.The second part is the theory of the reference. Above all, it retrospect the effectiveness of monetary policy and aspects of the theory. Secondly, it explain the two theories of the effectiveness of monetary policy in the open economy. Such as "M-F Model" and "Trilemma".The third part analyzes the factors which restrict the effectiveness of monetary policy. Combined with Chinese special economic environment, it analyzes how does it effect Chinese effectiveness of monetary policy under the external influence of the system of exchange rate, the flowage of the international investment capital, and the reserve of the foreign exchange.The fourth part analyzes the case studies of Chinese effectiveness of monetary policy. First of all, it reviews the operation of Chinese monetary policy in recent years, then it uses the model to analyze the effect of the percentage under the Chinese monetary policy in the open economy. The result shows that with the economic openness increases, the output of Chinese monetary expansion effects and price effects decrease..The fifth part is the conclusion and solution. From the above parts, combined with Chinese current situation, I give my own advice how to improve the effectiveness of monetary policy.The following is my conclusion: Firstly, the improvement of the open economy weakens the effectiveness of Chinese monetary policy. In China we lack of the flexible system of exchange rate, a large scale of international investment capital has been pouring into China, the reserve of foreign exchange increases a lot. For these reasons, it influences the result.Secondly, with the economic openness increases, the output of Chinese monetary expansion effects and price effects decrease. The internal reason is Chinese current policy. That is to say, Semi-floating exchange rate system and limited capital flows policy mixed.Thirdly, this is the fundamental method to implement "floating exchange rate system and the free movement of capital" of the policy mixed in the open economy in China, it can ensure the independence of monetary policy. This is the reform policy goal in the future.