A Study On Monetary Policy Rules And Their Applications

So far, people have debated on whether monetary policy should be carried out under rules or discretion. At the end of 1970s, it indicated that rules are better than discretion in the research of time discrepancy problem. Overseas scholars brought forward a lot of target mechanisms to reach optimal robustness economical purpose, however, they didn't agree on which concrete rule is optimal. Meanwhile, scholars abroad accumulated abundant experience in the practice of monetary policy. Whereas, so far monetary operation apparently showed discretion in our country, for lacking monetary operation experience, high frequency of loose or tack monetary operation, which result in big ups and downs in our economic development. At present, China's economic reform is at a crucial stage, the role of fiscal policy in stimulating economic development and stability is gradually fading out, while the role of monetary policy will significantly rise and need guidance related to the theory of monetary policy. Based on the modern neo-classical framework and the framework of the rules of monetary policy optimization problem, the paper uses numerical analysis to simulate the effect of the target operating system. Meanwhile, there are numerous uncertainties in reality, it will greatly affect the rules of operating results. It also examines the effect of uncertainty following the simple rules of operation. This paper is divided into six chapters, the concrete structure is as follows:Chapter 1 is introduction. The section I is the introduction of the background and significance of this study; section II is the academic reviews of the monetary policy rules research at home and abroad; in section III the paper pointed out that the main content and research methods. Finally, the work and research will be done is also point out.Chapter 2 is analytical framework for monetary policy. Analysis of the monetary policy framework includes the Phillips curve, the IS curve and monetary policy goals. Section I, we first introduced the concept of potential output and the output gap, detailed more information about their methods of estimation,and estimated potential output and the output gap in our country. Section II, we present the evolution and derivation of the Phillips curve; Section III introduced the IS curve and its derivation; Section IV presents the monetary policy objective and the objective function.Chapter III is the type and characteristics of monetary policy rules. This chapter introduces an extensive discussion of several domestic and abroad monetary policy rules, which are Taylor Rule, nominal income targeting, inflation targeting, price level targeting and so on. The chapter also analyzes the target systems' (rules') advantages and disadvantages and extensions, then makes the corresponding evaluation of these goals.Chapter IV, under neo-classical framework, we study optimization of inflation targeting, price level targeting, nominal income targeting rules and so on. Combined results of previous studies, this paper describes the details of the system in discretion and commitment to these goals mechanism of inflation, output gap solution in the form and the corresponding inflation volatility and output gap volatility. On this basis, we introduce the inflation bias solution. Finally, in connection with our related data, the paper simulates commitment under "effective monetary policy front."Chapter V is the problems of the monetary policy rules choice under the modern framework. Section I gives a modern framework for monetary policy analysis' solution method, numerical analysis; Section II, under the neo-Keynesian framework, we have studied the commitment's and the discretion's solutions and their related characteristics; Finally this paper applies numerical analysis to simulate the inflation-targeting system, the price level targeting. inflation-targeting prices mixed nominal income targeting, binding target rate system, mixed bound rate target system operating under the rules in effect parameter values, and points out mixed speed constraints objective may be more suitable to stable economic development, improve the overall welfare.Chapter VI is the constitution of monetary policy rules under the uncertainty. Section I detailed review of research literatures on the robustness of monetary policy rules under the uncertain conditions. Section II introduces impact uncertainty and parameter uncertainty in the policy responses and characteristics; Section III applies numerical analysis method to study simple rules soundness problems under uncertainty. This paper compares the operation effect of the Taylor Rule in three models : RS model, NK model and the NNS model, Through a simple three-parameter optimization rules, the use of Bayesian methods, this paper presents a simple optimal sound rules as a benchmark for monetary policy analysis model.