Viability Theory-Based Study Of The Monetary Policy

The performance of traditional theory of monetary policy is not satisfactory because its theoretic foundation is based on assumptions of rational agent and optimization that are very different from reality. Based on viability theory and monetary policy theory, this dissertation explores the regime of the conduction of monetary policy deeply from a new perspective. The dissertation is divided into seven main sections.Firstly, the study background and the value of topic are introduced. Then, the main contents, study path and innovations are outlined.Secondly, the basic thought and main idea of viability theory are explained. The basic knowledge of mathematics is briefly introduced. The framework of viability theory is set up. Some mainstream financial theories including theory of financial ecosystem, theory of financial sustainable development, theory of financial fragility and financial crisis are analyzed and interpreted uniformly by applying viability theory.Thirdly, the theory of monetary policy is surveyed. The ultimate targets of monetary policy, the instruments of monetary policy, the medium targets of monetary policy, the transmission mechanism of monetary policy and monetary policy rules are inspected. The inherent shortcomings of optimal monetary policy are pointed out, and the idea of satisficing monetary policy based on viability theory is presented.Fourthly, the meaning of a closed economy and its main characteristics are listed. The general form of macroeconomic model based on viability theory is put forward as a reference for the establishment of a monetary policy model. According to the four steps of model assumptions, model framework, the determination of viability domain and model analysis, the monetary policy model of closed economy based on viability theory is established. The two kinds of important economic situations, the overheating economy and the liquidity trap are analyzed deeply, and the appropriate policy suggestions are given. Fifthly, according to the meaning and characteristics of open economy, with the combination of finance theory and the appropriate assumptions, the monetary policy model of open economy based on viability theory is set up. The viability domain and the regulation map of the system are found out. The adjustment path and method of balance of payments with the control instrument of exchange rate are studied. The economic implications of the model are exposed.Sixthly, the history of the development of China's monetary policy is reviewed from the aspects of the ultimate targets, policy instruments, medium targets, the policy transmission mechanism and rules. The monetary policy model based on viability theory is built up and viability analysis is conducted. The viability analysis-based operation strategy of monetary policy is provided. The method of increasing the effectiveness of monetary policy is discussed. Finally, the study is summarized with future research directions presented.