Investigating Inflation Persistence Across Monetary Regimes

In today’s economics study, the theory of monetary policy research and its resultsis undoubtedly one of the most practical significance and value of the part. Because intoday’s world, monetary policy has become the decision makers generally used in themacroeconomic regulation and control to a macro economic policy. A complete set ofeffective monetary policy framework including choosing the right final goal，intermediary target, operational objectives, operating tools. Which monetary policyintermediary target occupies very important position, because of its connection withthe ultimate goal and operation target, is a monetary policy intermediate target ofreference, effective monetary policy intermediary target usually requires itsassociated with the ultimate goal, measurability, controllability. Due to theimportance of monetary policy intermediary goal in monetary policy framework, soabout how to choose reasonable and effective monetary policy intermediary goal hasalways been a favorite part of the economics researchers’ dispute. By review ofmonetary policy on the choice of monetary policy intermediary target practiceprocess, we can clearly see the development of the monetary policy framework.Looked at in thick line, until the1970s, Keynesian economics and policy proposalsto occupy the main position, its spontaneous think economic system operation isusually caused by a lack of effective demand and equilibrium in less than fullemployment. Therefore, Keynes advocated government intervention in the economyactively, in monetary policy advocated by interest rate as intermediate target, throughadjusting interest rates to boost investment, and expand the aggregate demand. In the70s and80s, the emergence of "stagflation" makes the Keynesian economics hasbeen widely questioned, since different army alone monetarism school graduallyaccepted by policy makers, the leader of monetarism Milton friedman think money isimportant, the short-term fluctuations on the economy, must through the money supply and money demand to analyze and put forward the "inflation" anytime andanywhere is a famous "monetary phenomenon","currency" school denied interestrates as intermediate target of monetary policy, and take in the money supply as themonetary policy intermediary goal, Milton friedman, also put forward the famous"single rule", which should be in accordance with the actual economic growth eachyear fixed money supply growth of monetary policy rules. But since the1990s, as aresult of financial innovation and the development of liberalization, financialderivatives emerge in endlessly, the money supply indicators cannot maintain thestability of with the ultimate goal. So, on a global scale, the validity of money supplyas the intermediate target of monetary policy more and more researchers ineconomics and government workers. After that, the economic researchers start to lookfor a new monetary policy framework "is one of the most striking the central bank inthe world today are explicitly or potentially to control inflation as the goal, and tendto choose the market of monetary policy tools, as one of the important ways toimprove the efficiency of monetary policy. The most typical is the European centralbank put "price stability" as the fundamental goal of monetary policy, inflation in thepast ten years of persistent has been the strongest macro economic research subject.Starting in the1990s, our country has experienced in the early90s inflation roughlyto the middle of the era of high inflation, the monetary policy the main purpose of thisphase is to curb inflation, to from after the mid-90-s to the end of last century era oflow inflation, the monetary policy the main purpose of this phase is to preventdeflation after entering the new century, on the whole, our country is in low inflationera but there are some disturbance factors, such as the revaluation is facing hugepressure in our country, the hot money inflows to our country economic environmentbring inflation pressure, the new economic environment, we must adjust ourmonetary policy, reviewing the current monetary policy strategy is the top priority ofour country. Our country as a developing country, to maintain stable economic growthtarget has always been the main goal of monetary policy in China, the inflationpressure will give our country monetary policy in macroeconomic regulation andcontrol has brought the conflict inevitably, because take deflation policy willobviously reduce the speed of economic growth, although the effect is not obvious, but is always a cost. This requires that the central bank to establish a balance betweenthem.Before scholars research as a reference in view of this situation, this paper,on the basis of using granger causality test, VAR model and impulse responsefunction analysis of the sustainability of monetary policy and inflation relationship;Comparing mixed frequency according to whether the use of the improved modelfitting and estimated effect, in order to monetary policy area system and therelationship between inflation persistence and simple analysis.