Study On The Monetary Policy Effects In China From The Perspective Of Inflation Expectation

Expectation has long been a heated-debate topic in the field of economics and finance theory research. Although it is invisible, it does exist throughout the every aspect of western macroeconomic and microeconomic theory and empirical research as one type of description on economic agents'psychological feelings towards future uncertainty, and becomes the foundation for many classic economic theories. Among varieties of expectation psychological activities, inflation expectation is the one which mostly reflects economic agents'subject feelings towards inflation changes, and gradually develops into a completed, attention-focused, independent economic research system in about 70 years. With the increasing unknown changes and advance of economic knowledge level of economic agents, the initiative of adjusting their economic behavior with reference to expectations towards future price and overall economic environment greatly improves. Besides, the degree of economic agents' involvement in the formulating and implement of monetary policy also notably increases, which makes monetary authorities around the world can not ignore the objective existence of inflation expectation any more, as well as its potential influence on the final monetary policy effects by affecting economic agents' behavior. As a result, this paper regards the relationship between inflation expectation and monetary policy effects under the background of China's economic environment as the main focus, and discusses the objective existence, type of inflation expectation formulation mechanism of Chinese economic agents, the connection between inflation expectation and the time and quantitative regulation effects changes of monetary policy respectively.This paper presents the following questions:(1) Whether inflation expectation objectively exists in China and what is its formulation mechanism? (2) Whether there is relationship between inflation expectation and the time and quantitative monetary policy effects? If it is, what is the microeconomic mechanism of inflation expectation affecting the target monetary policy effects? (3) Considering the economic conditions and monetary policy regulation framework in China, what policies should PBC adopt to improve the overall monetary policy effects by guiding inflation expectation reasonably?In order to answer the above questions, this paper is based on the identification and quantitative estimation of inflation expectation using the urban savings questionnaire survey system. By combining with the basic characteristics of Chinese economic agents'inflation expectation, this paper reasonably modifies the underlying prerequisites of the existed related models, and puts forward to the microeconomic mechanisms of inflation expectation influencing the changes of time-lag and the asymmetric effects of loose and tight monetary policy using certain mathematical derivation and logical reasoning. Based on the theoretical analyses, this paper empirically proves the relationship between inflation expectation and the changes of time-lag and asymmetric monetary effects in China with the SVAR and MS-VAR models respectively.The main conclusions are as follows:(1) Based on the urban savings questionnaire survey system, the calculated inflation expectation is highly fitted with the actual inflation rate, which means that economic agents'inflation expectation is an independent quantified economic variable. Because of its effectiveness and adaptability characteristics, together with its lack of unbiasedness and correlated expectation deviations, Chinese economic agents' inflation expectation meets the basic requirement of bounded rationality mechanism. (2) Considering the existence of Chinese economic agents' inflation expectation, the time-lag effects of central bank's quantitative and price monetary policy on real economic growth and price fluctuation are significantly magnified, which is mainly reflected in the longer time to realize the best effects and more evident overall lasting effects of monetary policy. (3) There exists asymmetric effects between monetary policy regulation and the changing level and variability of Chinese economic agents' inflation expectation. And the overall effects of monetary policy are negatively related with the increasing of inflation expectation level and variability. (4) PBC needs to advisably refer to the successful experience of western monetary authorities in guiding economic agents to form stable inflation expectation to improve monetary policy effects, and gradually constructs the inflation expectation management system under the economic environment of China from improving the transparency and consistency level of monetary policy perspectives, which in turn will greatly strengthen the effectiveness of monetary policy..