On The Inflation Targeting System. "

Inflation targeting is a monetary policy framework that has appeared in many industrial and developing countries since 1990s. Central bank, government or they two announce concrete inflation target, then central bank is responsible for the final target of monetary policy with inflation target is the first one, that is to say, monetary policy doesn't promise and engage in any other mediate target. As such a monetary policy has given high discretion authority to central bank, transparency and accountability are its additional features in order to avoid time inconsistency and obtain credibility.This dissertation is not a simple case study either a guide to apply inflation targeting. It aims to explain the reason that more and more countries transfer to announce and use the monetary policy framework. The main parts of the dissertation include the comparative research on monetary policy framework and the applicative analysis on inflation targeting. Based on thus, the dissertation explores into the direction of Chinese monetary policy.Monetary policy is not either rule or discretion, and the fact is that almost all kinds of the monetary policies are combination of rule and discretion. The dissertation differentiates monetary policy into operational targeting rule, mediate targeting rule and ultimate targeting rule as their discretion authority is increasing gradually. The comparative research presents the rationality of inflation targeting.Using the macroeconomic model that can reflect financial structure and mechanism of monetary policy, the dissertation analyzes the applicability of intermediate target variables. The demonstration points that the way of using information variable is the realistic choice under the condition of complicate and changeful financial structure.As deflation becomes a realistic challenge to inflation targeting or monetary policy, the dissertation analyzes the state of deflation and liquidity trap and the role of inflation targeting in dealing with them. First, the dissertation demonstrates that inflation target should be a reach round zero referring to the research on optimal inflation rate, that is to say, anti-deflation and anti-inflation are both the task of inflation targeting. Second, the dissertation distinguishes good and bad deflation by exploring the aggregate demand and supply factors causing the price presentation, meanwhile, inflation targeting can avoid the economy be trapped into bad deflation by setting and implementing inflation target. Third, the dissertation analyzes liquidity trap by comparing with deflation and points that depreciating money and adjusting economic structure are respectively short-term and long-term projects dealing with it.Based on theoretical analysis, the dissertation concludes constitute of inflation targeting including its affirmative standard, additional features, basic condition and operative model.The dissertation tests statistically the real effect of monetary aggregate as the intermediate target of Chinese monetary policy and the role of interest rate in current monetary policy framework. Furthermore, the dissertation demonstrates the directive significance of inflation targeting to Chinese monetary policy by analyzing Chinese financial structure and mechanism of monetary policy.