Analysis On Monetary Policy Instruments Of The People’s Bank Of China

Monetary policy instruments play an important role in the monetary policy implementation, and will have great effect on the target of monetary policy. This paper briefly introduces the key viewpoints on the monetary policy targets and instruments, and looks back on the experiences how the main central banks develop both conventional and unconventional monetary policy instruments. This paper then presents systematicly the main instruments that the People’s Bank of China once used and is employing during the transformation from direct regulation to indirect regulation, and analyses how the PBC implements the monetary policy by applying various instruments in the six different stages in the past30years. The paper also examines the the relationships between the broad money and output and inflation, between interest rates of central bank bills and interest rates of monetary market. On that base, the paper points out that the the most serious problem the PBC has to face is lasting excess liquidity, which has aggravated the problems such as multi-targets of monetary policy, blocked monetary mechanism, ineffective monetary operations and so on. Finally the paper puts forward a series of suggestions to improve the monetary policy instruments and raises some issues that need to study further.