Intermediate Target, Regulation Mechanism, And Prudent Macro-regulation Under Financial Friction

The main body of the thesis consists of three essays about China’s monetary policy. Each paper is under the dynamic general equilibrium structure with rational expectation. The aim of this thesis is to connect the latest monetary policy theory with China’s real economic features for researching some important monetary policy questions of China. There are five chapters in this paper. The first chapter is introduction, which simply states the background, research route, literature review, innovation points and shortages. Chapter2,3and4are the body of the text. Chapter5summarizes the whole and makes some corresponding policy recommendations and future research direction.Chapter2mainly talks about the choice of China’s monetary policy indicators. In the west, most countries chose interest as their monetary policy indicator but not money. However, whether money should be the People’s Bank of China (PBOC)’s indicator is controversial for China has not finished the interest rate liberalization. This chapter begins with the money’s role in utilization function, builds a general equilibrium model with money and does the empirical test by China’s1998～2013statistics. The result shows that the money’s effects on China’s economy are decreasing; model without money is more convenient, and the PBoC should choose the interest indicator as its monetary policy indicator.Chapter3build a DSGE model with many monetary policy regulation modes according to China’s economic features for analyzing different policies’effects. The breakpoints of this chapter are the inclusion of different kinds of interest rate and coexistence of both market and administrative means. The result shows the DSGE model I made can be used to analyze the China’s monetary policy, the PBoC can make use of the monetary market interest rate to regulate the real economy, and the countercyclical credit operation is able to reduce the volatility of economy, but it will also reduce the financial efficiency.Chapter4analyzes the effect of financial friction on financial efficiency and economic fluctuation by a real business cycle model with financial sector. The bankers in the model must exert effort in order to match the enterprise with higher efficiency. An agency problem arises because the banker’s effort is not observable to his creditors. The result shows that the financial friction will depress the fluctuation, decrease financial efficiency and make the social welfare decreasing. So the central bank’s countercyclical macro prudential management policy with raise the financial efficiency and increase the whole society’s welfare.