Analysis And Selection Of The Effect Of China's Monetary Policy

Since China established the system of Central Bank in 1984, with the ratio of financial expenditure/GDP declining, the function of financial policy is weakening and monetary policy is becoming the main means of China for adjusting and controlling macro economy. During the practice of monetary policy following the reform and opening-up, sometimes monetary policy didn't gain expected effect, which makes people suspect on the effect of the monetary policy. At present, domestic practice of monetary policy provides data for research, and new tendencies of monetary policy of other countries appear, which makes the author select this title for research.The monetary policy means that the Central Bank or the monetary authorities uses various kinds of policy tools to regulate the demand by means of monetary stock, and then mediate macro economy. The effect of monetary policy means that whether money supply as the policy variable can realize the goal of monetary policy through the operation of monetary policy tools. The common standard of measurement is whether the operation of the monetary policy, especially the change of the money supply can cause the change of real economic variables, especially real output.The monetary policy of China has already been produced before the reform and opening-up. This paper divides the development of China's monetary policy into two historical stages, that is, the first stage is 30 years before the reform and opening-up (1948-1978) and the second is the years after the reform and opening-up since 1949. China carried out highly centralized and unified planned economy in the past 30 years before the reform and opening-up, and mcro economy regulation and control mainly depends on planning and financial means, thus the monetary policy is subordinated. The government's economic goal is the monetary policy's goal of the People's Bank of China. The monetary policy goal is developing economy and maintaining price at a stable level. Developing economy is put in the first place, and keeping price stable catches the attention only when issues appear. The intermediary goal and operational goal are not obvious, and credit and cash plans are the main means of monetary policy of the People's Bank of China.The effect of monetary policy for regulating and controlling macro economy is strengthening before the reform and opening-up. Since the system of Central Bank of China is established in 1984, the People's Bank of China is advancing the change of monetary policy from immediate regulation and control to mediate regulation and control. The final goal experiences the change from developing economy and maintaining stable price to maintaining stable price and developing economy on the base of maintaining stable price. The intermediary goal experiences the change from credit scale to money supply, and the operational goal experiences the change from credit scale to base money. The monetary tools experience the change from direct tools to indirect tools.On the base of deeply analyzing the monetary policy practice since the foundation of China, this paper launches the research of China's monetary policy effect. I provide the analyzing frame of monetary policy's effect at first, and point out that it includes two aspects of theory and practice. The theory studies the relationship between money demand, supply and monetary policy's effect, namely whether the change of money supply can cause the change of real economic variables. The practice studies the relationship between the goal system, transmission mechanism and monetary policy's effect, namely how the Central Bank confirm the final goal, the intermediary goal and the operational goal of the monetary policy, select proper policy tools, perfect the transmission mechanism of the monetary policy, and realize the goal of adjusting and controlling the macro economy.Predicting monetary demand function correctly is the key to implementing monetary policy effectively. On the base of reviewing monetary demand theory and experienced methods, I con...