Study On China's Applicability Of Monetary Policy Rules

Research on monetary policy rules has been one of the hottest issues in macroeconomics.From the debate on discretion or the monetary policy rules,from the quantity Friedman rule to price-style Talor rule,the discussion about the applicability of monetary policy tools never stops.The findings of the applicability will help to make the central bank's monetary control policies targeted to reduce the volatility of macroeconomic and maintain sustained,stable and efficient development of the economy.It is of great practical significance.Firstly,we sort the relevant Chinese and foreign literature.Based on the results of previous studies,we introduce the research methods and innovations in our article.We use the mainstream new Keynesian DSGE model to analyze the applicability of monetary policy rules.Referred to Gali's(2005)model we construct an open economy DSGE model,and combine the base model with three different monetary policy rules equation(quantitative rules,interest rate rules,mixed rules)to form three new Keynesian DSGE models.By calibration and Bayesian estimation methods to determine the parameters,we simulate three types of exogenous shocks to output and inflation impulse response curve.Through the comparison and analysis of the impulse response curve,we can draw some conclusion.Interest rules at this stage is relatively the best.When using interest rate rules to regulate,economic variables can respond effectively to monetary policy.Under exogenous shocks interest rules can make the level of output and inflation a greater deviation but quicker reply to steady state in a short time.As for the higher level of output and inflation deviation under exogenous shocks,we can make adjustments based on the actual situation in the process of formulation and implementation of monetary policy.When using interest rate rules to guide monetary policy,we should also refer to the output and inflation policy objectives and opportunistic adjustment.Because it takes less time to return to balance level when using interest rules,we can adjust the interest rate continuously and mildly to achieve a better control effect.