A Comparative Analysis Of The Effectiveness Of China 's Three Major Monetary Policy

Monetary policy is an important approach to affect the macroeconomic of the country. It’s meaningful to study the effectiveness of the various monetary policies for the central bank. So this article systematically analyses and compares the efficiency of the three main monetary policies both in qualitative and quantitative aspects in China.To begin with, this article researches the traditional theories of the economics of financial markets, including the targets of the policies, the mechanism of the monetary transmission and the instruments of the monetary policies. Based on this research, the article focuses on the instruments of the Chinese monetary policy:the basic interest of the deposit/load, the federal reserve ratio, and the open market operation. Then the article reviews the developing process of the monetary policy in China since1984, discusses our target of the central bank’s monetary policies and analyses China’s monetary policy tool based on our history.In validation part, based on monthly data from Jan.2004to Dec.2012, this article analyzed the effect of ultimate target of two main monetary policy and intermediary target of every policy with impulse response and variance decomposition approach with VAR module. It turns out that the regulation of interest rate provides most remarkable effect on every target variable; IBOR is most sensitive to open market operation; reserve ratio however, affects least of all.To sum up, this article provides two pieces of suggestion in policy aspect:1. Improve economical market system, eliminate the dependency of deposit rate regulation and keep reserve ratio and open market operation effective, besides of pushing marketization of interest.2. Develop bond market and improve operability of open market while monetary policy was transform towards price target.