The Research Under Influence Of Foreign Exchange Sterliazation Monetary Policy Effect

With the continuous progress of global economic integration, the interdependence between China’s financial market and world economy become closer.Nearly 10 years, China has accumulated the world’s first foreign exchange reserves, which has caused many problems.The increase in foreign exchange reserves bring a great influence to the domestic currency on the excessive pursue traditional money.Because of the foreign exchange problem leading to huge amount foreign exchange reserves become the main channel of China’s currency basis, Through the money multiplier effect make tmoney supply increase greatly, which have negative effect on the economy. In this regard, the monetary authorities take measures against offsetting monetary base due to foreign exchange reserve, and then maintain the independence of monetary policy.Under influence of foreign exchange sterilization, this paper study that China’s monetary policy price make influence to stability and economic growth.This paper is based on the independence of monetary policy considerations, combined with the central bank loss function,on account of the BGT model in order to the research on them.On the basis of predecessor research results, firstly, the paper make a clear exposition of the definition and theoretical model of foreign exchange sterilization. Secondly, I analysis China’s sterilization characteristics and practice and the existing problems. When I provide definition about monetary policy effective and monetary policy effective consideration, selective analysis them applying for the theoretical perspective and data perspective. Thirdly,according to China’s central bank, the author estabish the modified BGT model.While I Consider that the People’s Bank of China substitute undue repurchase for central bank bill in September 2002, the paper selects month data from October 2002 to March 2014 and adopt VAR model. After the data proceed unit root test, cointegration test and causality test processing, thesis study the model’s each variable dynamic path by the mean of impulse response function and variance decomposition.The results show that in the short term foreign exchange sterilization effect is remarkable,which make CPI stable and output level rise,what indicate that monetary authorities formulating monetary policy effect overall significant; but in the long term, the foreign exchange is not very significant, effectiveness of monetary policy has been put to the test. Finally, in consideration of present situation of current China’s monetary policy and foreign exchange sterilization, combined with the results of theoretical analysis and empirical research, I put forward some suggestions to improve the effectiveness of monetary policy in China.