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Endogenous Money, Triangle Dilemma And China's Monetary Policy Analysis

Posted on:2005-11-30Degree:DoctorType:Dissertation
Country:ChinaCandidate:X Y WangFull Text:PDF
GTID:1116360125967316Subject:History of Economic Thought
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The purpose of this thesis is to analyze some problems and their background mechanisms of monetary policy's targets and instruments in China, rather than to evaluate the effects of China's recent monetary policy itself. Some conclusions are obtained: Along with the development of monetary theory, theoretical basis plays a more important role in monetary policy. Both the targets and instruments of China's recent monetary policy are confronted with shortcomings of theoretical basis and realities' challenges: first, the main theoretical shortcoming is the bad interactions between the process of China's financial deepening and the monetary quantity theory lacking in micro-foundation. Second, The dual targets of China's monetary policy (keeping the value of the currency and helping economic growth) are very difficult to carry out in front of the realities of Trilemma, money base created by foreign reserves, and unstable money supply and demand, etc. With the unstable money velocities, the monetary demand function and money supply mechanism are both variable, which decrease the effect of recent monetary policy. Money quantity rules in China are facing the challenges of both inside money creating mechanism and the types of economic random shocks. The inside money creating mechanism includes domestic factor (credit expansion) and foreign factor (money base created by foreign reserves); random shocks means money demand shocks and real economic growth shocks. After analyzing the development of monetary theory, applications of foreign countries' monetary policy and the shortcomings of china's monetary policy, the author attempted to create a credit macro-model by introducing inside money shocks to general-equilibrium model. This new 5model aims to analyze which monetary policies and theoretical basis are more effective to the implement of monetary policy in the process of china's reforming. In summary, although China's monetary policy was announced independent nominally in 1998, it is still independent to some extent in essence. Monetary policy didn't show its expected effect, and the monetary administration authority still needs to enrich instruments and targets of China's monetary policy, deepen its understanding of the theoretical basis of its policy, etc. The creations and methodology of this thesis: First, Although there are a lot of researches on monetary policy, this thesis at the first time analyze the monetary policy from the theoretical basis; Second, the author focused on the inside money in the analysis and got the conclusion that unstable inside money creating mechanism was an important factor in limiting the effect of china's monetary policy; Last(most important), the author attempted to create a credit macro-model by introducing inside money shocks to general-equilibrium model, and then obtained some significant conclusions. The methodology of this thesis is mathematical, demonstrative and comparative analysis. The structure of this thesis is as follows: Chapter one "Introduction" advances the topic of the thesis, explaining the two main problems that China's monetary policy is facing, introducing the contents and current conditions of China's monetary policy, and ultimately reinforcing the importance of the theoretical basis of monetary policy. Chapter two "Survey One: the development of modern monetary theory" introduces the development of monetary theory in the past forty or so years, including the its origins and classification, the three horsepower models 6in neoclassical theory: overlapping generations model, Sidrauski model and Cash-in-advance mode. The last part introduces the search model developed recently. Chapter Three "Survey two: the development of monetary policy" separately introduces the simple framework used to analyze monetary policy, some focusing issues of monetary policy in the viewpoint of the development of monetary...
Keywords/Search Tags:inside money, Trilemma, foreign reserves, random shocks
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