The Practice Of Transition Of Fed’s Monetary Policy Operation Mode And As China’s Reference

In the course of promoting the marketization of interest rates and under the modification mode of quantitative monetary policy in China, the controllability, scalability and relevance of monetary supplies as the inter-target selections are significantly weakened by the financial innovation.In the recent five years, the foreign exchanges never rockets as before, the central bank is not passively required to put tons of base currency and hence should fully take the golden opportunity of the transformation of the mode of monetary policy modification and invent or chose the appropriate, regular and current placement tool. Based on the background and in the course of marketization of interest rates, the primary task of the monetary authorities of China is currently to construct the system of the benchmark interest rate, to perfect and innovate the tools of monetary policy so as to build the modification frame system of price-based policy.The shift of the modification mode from quantity-based monetary policy to price-based one is not built in a day, but is a progressive change, which gradually adjusts the monetary policy as the inter-target and is accompanied by diverse tools of currency polices. A case in point happens right in American history. The Fed, from October,1979 to October,1982, placed the monetary supplies as the inter-target to fight against the stagflation. It mainly adjusted the non-borrowed reserves by publicizing the market tools and later resulted in the considerable fluctuation of federal funds rates. From October,1982 to July,1993, recovering the economy,Fed tried to regard borrow reserves as inter-targets, comprehensively utilized the tools of market and adjusted the rates of rediscount, ensuring the relative stability of federal funds rates. Fed, since 1993, has placed the federal funds rates as the inter-targets, adjusting the market flow and increasingly leading the recovery and development of American economy by publicizing market measures and collectively used a variety of innovative tools of monetary policy.The reasons why this paper probes the implementation of tools of monetary policy during the course of transformation of currency polices through the changes of balance sheet in the history of Fed consist of two points. Firstly, the shift from quantity-based polices that place currency supplies as inter-targets to price-based currency polices that place price variables as the inter-targets, in essence, is the shit of inter-targets of monetary policies. Secondly, every implementation of currency polices is rightly a kind of business of balance sheet, which can be fully exemplified in the changes of properties and balances of central bank. This paper analyzes the monetary policies by utilizing the correspondence between the balance sheet and implementation of currency polices of central bank, so as to judge the specific mode of practices of monetary policy tools. Through the changes of programs of the balance sheets, it also distinguishes the utilizing frequency of monetary policies operation and detailed currency polices tools, purses the background of tools operations and causes of resulting in the differences.The structure of this paper mainly consists of five parts. The first part is introduction. The second part introduces the related monetary policy theory and elaborates that the central bank’s balance sheet is a window of monetary policies operation. The third part divides the Fed’s shift from quantity-based to price-based monetary policies during the eighties and nineties of twentieth century into three periods:before during and after the transitions, which collectively probes the emphasis as to how to use tools of monetary policies and currency polices through the relative chances of properties and debts of balance sheet. It figures out that the publication of market operations has been the most vital tools of monetary policies for Fed. However, the remaining structure of securities and the rates of rediscount during each period had been greatly changed. This policy was primarily utilized by Fed during the transition period. The fourth part is the analysis of quantity-based monetary policy. Firstly, make a contrast of balance sheet of central bank between China and America, which can vividly show the difference of the type of monetary policies. Second part is the reflect of PBOC’s balance sheet beneath the quantity-based monetary policy. At last, elaborate the certainties of the transition of monetary policy mode in PBOC. The fifth part is the enlightenment for PBOC’s transition of monetary policy operation based on the Fed’s experience. The suggestions are as follows, like gradually increasing the amount of national debt holdings; moderately rising the intensity of spot trading transactions; increasing the frequency of operating other innovative tools like SLO; adjusting SLF interest rates to the benchmark interest rate; enriching the evaluation system of different reserve system and so forth.