Research On Monetary Policy Information Transmission Mechanism Based On Interactive Learning

The dissertation focused on the interactive learning, analyzed the higher-order belief, information structure between the central and the private and analyzed the influence of learning activities on the social information structure, monetary policy information transmission mechanism and the framework of monetary policy. The author testified the private learning activities and inflation expectation in China and provided corresponding suggestion.The part of introduction explains the background, main problems, structure of the dissertation, methodology, main conclusions and innovation points.Chapter Two reviewed relative research results of native and international researchers. There are lots of literature on expectation and expectation formation, learning activities of central banks and the private, monetary policy transparency, social information structure and monetary policy transmission mechanism. Researchers have already analyzed above problems from different aspects and different countries. Their literature review not only showed the evolution routine of macro-economic control theory and practice as time changes, but also showed that the private intentionally actively affects macro-economy control. The research result on the interactive relationship between central banks and the private is relatively rare.Chapter Three analyzed the learning activities of central banks and the private, learning mechanism and expectation formation. The rational learning and the adaptive learning are most popular. In the interactive learning mechanism, there are inter-dependent and inter-influential dynamic procedure between the central bank and the private. The central bank has relative information advantage and has a high weight on the private expectation formation procedure. The private expectation also affects the central bank decision procedure which is shown by the central banks learning and decision activities. Otherwise, the information transmission mechanism is inefficient. However, higher-order belief has negative influence. The private depend on the forecast results from the central bank and has little motive to judge by themselves. So, the expectation adjustment speed decreases and it is hard to show the true reaction to the economy shock of the private. The private learning activities adjust continuously from PLM to ALM. The higher-order belief of the central bank decides the learning speed and the extent to which the public forecast result is accepted. The interactive learning mechanism testified the importance of the two-way information transmission.Chapter Four first analyzed the paradox of monetary policy transparency, that is to say, the accuracy of the forecast results from the central bank and the private di’d not increase with higher transparency. The central bank has information advantage and has a higher weight of the higher-order belief, which crowds out the private information. The central bank should decide an appropriate extent to reveal public information. The interactive learning between the central bank and the private creates the motive to distort the policy reaction. The crowed out effect between private and public information deceases the valuable information and leads to less accuracy of information. When the substitution exists between the central bank and the private, the total volume of information does not increase. The accuracy of private information affects the information resources of the central bank. When the information is dispersed, the central bank and the private has information complementary structure which increases the total volume of social information. So, it is important to keep information dispersed to both the central bank and the private.Chapter Five analyzed the monetary policy transmission mechanism. The information transmission mechanism links information and expectation. The central bank issues public information and guide the expectation by higher-order belief, which includes information issue and reaction procedures. The information transmission mechanism has such characteristics as two-way information transmission, dynamic and interactive and forward-looking, which shows the interactive relationship between the central bank and the private during the procedure. Learning speed, public information and higher-order belief has the characteristics of two-edged weapon. The efficiency of information transmission mechanism depends on the equilibrium of both positive and negative function of learning activities, public information and higher-order belief by both the central bank and the private. The information transmission mechanism affects corresponding parts of the monetary policy framework. According to the requirements of forward-looking operation and management of expectation, the central bank should adjust monetary policy rule, intermediate aim, instruments and the content of information communication.Chapter Six analyzed the main content and characteristics, existing problems and reasons of problems of monetary policy information transmission mechanism in China. Because of the shortage of quantified ultimate aim and low degree of independence and transparency, the information transmission mechanism does not have the advantage of two-way information transmission or dynamic-and interactive procedure, which is hard to stabilize the private expectation. The central bank seldom communicates with the private or provides forward-looking information. There is no efficient measure to compensate the shortage of nominal anchor.Chapter Seven empirically analyzed the signal role of monetary policy and the learning activities of the private in China. To those people with higher learning ability, the increased information did not decrease the instability of expectation due to the over-reaction. The learning ability of the private is a two-wedged weapon to the central bank’s intent to stabilize the expectation. When there is no definite control aim or the private applied adaptive learning method, the confidence index itself and CPI has high and last effect on expectation formation, the effect of GDP growth rate is less than expected and there is certain inflation scares. The aim with restriction and reliable price information has direct and long effect on private inflation expectation. The Granger relationship between the inflation expectation and GDP growth rate shows the importance to manage expectation to realize the control aim.Chapter Eight first analyzed the success of The Fed, Bank of England and ECB. They pay high attention to increase the transparency of monetary policy, announce the policy decision timely, reveal the details of decision procedure and strengthen explanation and propagation to decrease the misunderstanding and error of decision. PBC could accept rule-based control measure which means that the central bank would not be restricted by the single aim and can solve the problem of the shortage of nominal anchor and low degree of transparency. Such measure provides a standard for the private to judge the central bank action. PBC" should set a level of stabilization of price and provide a reasonable fluctuation zone. PBC should give the aim of stabilization of price and the growth rate different weight. PBC should provide more forward-looking information and increase the private learning ability of such information. The intermediate aim should pay attention to the private expectation. The branches of PBC and supervision authorities should play important role in collecting information and decision procedure. More communication measures should be applied and The Monetary Policy Committee should strengthen the communication with the private.Chapter Nine concludes the whole dissertation.