Market Confidence And The Expectations Guiding Of Monetary Policy

The emerging economies of the global economy,including China,have been mired in trouble since the financial crisis by 2014.Under the influence of weak global demand,China is also experiencing overcapacity,insufficiency of effective demand and the rigorous test of economic slowdown.The continued downturn in the real economy begin to spread into services,consumption and other fields.Macro-economic prosperous is facing a overall decline in this situation,in contrast,the virtual economy of the stock and property market,firstly drastic rising and dropping suddenly and sharply in the stock market,then the soaring house prices in first-tier cities,which lead to a "Recession style bubble" continuous rendering.The overall decline of Macro-economic prosperous and abnormal fluctuation of asset prices directly fall the confidence of economic agents,such as entrepreneurs?investors and consumers,etc.In the face of China's growing downward pressure,we can not help but think,how Macro-economic policies regulations to turn around the economic situation of continues to dip,to make the economic development out of the bottom?And how monetary policy can effectively change the pessimistic expectations of microeconomic agents to increase the effective transmission of economic regulate policies?Based on this,the paper starts from the perspective of monetary policy regulation by boosting the market confidence and guiding the expectations of the economic agents to promote the steady development of the economy,trying to use the general econometric model and dynamic stochastic general equilibrium model to analyzes the problems of how the monetary policy regulation affects the public's market confidence and guide the public's expectations,and investigate the use of subtle tune and information communication of monetary policy to stimulate the market sentiment with "catalyst" effect,in order to improve the effective transmission of the central bank's monetary policy and achieve the regulation target of economic policy.Therefore,under the new economic normal,it is of great theoretical and practical significance to study the issue of China's monetary policy regulation to boost market confidence and public expectations.The main research works and contributions are as follows:1.The fluctuation of market confidence has an important influence on economic operation.In this paper,using ARDL-ECM model,it tests empirically the short-term dynamic relationship and the long-run equilibrium relationship between consumer confidence,business confidence and the influencing factors.The researches indicate that asset prices,interest rates,exchange rates have a significant impact on consumer confidence and business confidence.By comparison,the impact of the driving factors on business confidence is greater than the impact on consumer confidence.The paper proposes that the future of China's policy formulation and implementation needs to pay more attention to changes in market confidence,and to improve the effective transmission of the policy by stabilizing and boosting the market confidence.2.Focus on the perspective of monetary policy regulation affect on market confidence,including both aspects of actual intervention of monetary policy and central bank policy information communication.In this paper,we make a deep theoretical analysis on the regulation of monetary policy and the formation of market confidence,and through the construction of central bank information communication index,use the SVAR model to test the influence of the two aspects to China's monetary policy intervention and the central bank information communication on the market confidence,including the business confidence and consumer confidence.The research shows that the confidence of economic agents has an important role in the regulation of monetary policy.China's monetary policy intervention has a certain impact on market confidence,but the central bank policy's guidance on market confidence has room to be improved.And it also points out that in the adjustment of monetary policy,we should pay attention to the economic fundamentals,but also pay attention to stability and boost market confidence,reduce the adverse impact of confidence fluctuations on economic development.3.In the actual economy operation,the formation of economic agents' expectations is closely related to the credibility of monetary policy,the higher the credibility of monetary policy,the more obvious the guiding effect on the expectations of economic agents,and the regulative effect of monetary policy would be better.Therefore,from the perspective of the credibility of monetary policy,this paper analyzes the main factors affecting the credibility of monetary policy,and further analyzes the credibility of monetary policy based on the expectations guidance effect in our country.Based on the empirical results of China's monetary policy guidance to the public and institutions and the credibility index,at present,the overall level of China's monetary policy credibility is not high.As China's economy into a new status,requirements for stability and guide market expectations are even higher,in such context,the continuously improvement of the credibility of monetary policy is very effective in guiding the economic agents' expectations and perfecting the monetary policy regulation mechanism.4.By establishing a Factor-augmented VAR model that contains a large number of macroeconomic and financial information,we make research on the interaction between macroeconomic operation and market confidence,and the mechanism of monetary policy in China.In this paper,we examine the sensitivity of the factor variables to the confidence shock,which is decomposed from a large number of macroeconomic data indicators.The research shows that the market confidence of our country is effective in the feedback of economic activity.It's just that economic activity is complex and changeable.The complicated interaction of various economic variables and the emergence of various problems in the economic operation appears continuously,which would offset the power of confidence.This provides an empirical basis for China's monetary policy to strengthen the implementation of macroeconomic expectations management,and actively guide the public market confidence.5.By constructing the DSGE model under the new Keynes framework,we try to introduce the(expected)news shocks into monetary policy regulation.To combine the expected shocks and monetary policy regulation,we observe the impact of monetary policy announcement(expected)shocks on China's macroeconomic fluctuations.Introduction of news(expected)shocks into monetary policy regulation,it is equivalent to the central bank in the appropriate expectations management,or that the central bank through the early release of monetary policy signals to adjust the information set of the public by means of information communication,and guide the public's psychological expectations and market confidence,in order to achieve the objective of regulate the smooth operation of macro-economy as well as affect the cyclical fluctuation of macro-economy.The results show that the expected shock of the technological progress of total factor production and the expected shock of monetary policy regulation can make the main economic variables co-movement,such as consumption,investment,output,etc.When the central bank implements the expectations guiding by means of information communication,such monetary policy signals released by the central bank have an important influence on the stable operation of the economy.