The Research On Taylor Rule In Chinese Monetary Policy

The controversy between rules and discretion in the monetary policy research has a long history. Since 1970s, after the theory of dynamic inconsistency being put forward , people began to realize the problem of time inconsistency in monetary policy and inflation bais. Since 1990s, monetary policy rules have received pervasive recognition . A monetary policy rule can guide the central bank to make feasible monetary policy, it can also improve the effectiveness , credibility and teansparency of the monetary policy, so more and more countries apply it to practice .A simple rate rule raised by Taylor(1993) become the new beginning ot the research of monetary policy rules. People regard it as an authority rule in deciding rate as it captures the nature of monetary policy. Hereafter, academic member use it to test the monetary policy of many countries. The facts prove that many developed countries and emerging countries follow the principles of Taylor Rule in monetary policy and have obtained goog result .The monetary policy decisions of China present the obvious discretion features, the macro-economy state had always been changing between hot and cold, and the macroeconomic instability faced with threat. The dissertation analyzes the practice of monetary policy in China, and use the Taylor rule to examine it .The conclusion is that the Taylor rule can be a referenced measure to measure the degree of tightness of monetary policy in China.So ,it is necessary to set the stage for the applitation of the Taylor rule in Chinese monetary policy. The main content of this dissertation is:Chapter 1 introduce the research background ,significance and mothod in this dissertation, points out the major innovation and deficiencies of the dissertation.Chapter 2 state the history of monetary policy. Rule or discretion is a subject which various economics had been debating for a long time.Since the dynamic inconsistency theory was put forward , people have paid more and more attentionon monetary policy rules . Barro and Gordon’s research further verified the rules is better than discretion .In order to overcome the inflation bias in monetary policy, economics have discussed many ways such as the reputation constraints, hiring a conservative central banker ,the implementation of inflation targeting, design the optical incentive contract,etc.Chapter 3 introduce the monetary policy rules. Monetary policy rules include instrument rules and targeting rules. Instrument rules include the traditional quantity rule ,Taylor rule,McCallum rule. Targeting rules include inflation targeting rule, price level targeting rule, monetary growth targeting rule, exchange rate targeting rule,etc.Chapter 4 analyze the application of the Taylor rule in developed countries and emerging countries, and then use the Taylor rule to examine the practice of monetary policy in China, the conclusion suggest that the Taylor rule can be a referenced measure to measure the degree of tightness of monetary policy in China. After that, the dissertation also analyzes the applitation of the Taylor rule in Chinese monetary policy.Chapter 5 point out the problems we should pay close attention to when putting the Taylor rule into practice of monetary policy in China. They are such problems as that the effectiveness of monetary supply as the intermediate target , interest rates marketlization , transparency of monetary policy, the cultivation of benchmark interest rate, the construction of pricing mechanism of commercial bank, financial market segmentation,etc.Chapter 6 is the conclusion.