A Study On The Effectiveness And Rule Of China's Central Bank Communication

Since 1990s,an important trend in the development of central banks has shifted from secret to openness and transparency.Some central banks have begun to implement the "inflation targeting system" that represents the highest level of monetary transparency in monetary policy framework.Many other central banks such as the Federal Reserve,the European Central Bank,Japan's Central Bank,the Brazilian Central Bank did not take inflation targeting,but they also took a number of measures to increase transparency of their monetary policy.Increasing the transparency of monetary policy has become the consensus of the central banks and academia and academic research on monetary policy transparency began to shift to the study of central bank communication.After the global financial crisis in 2008,the"quantitative easing" and "forward guidance " and other non-traditional monetary policy tools gradually came into the public eye,which further promotes public awareness of the importance of central bank communication and expectation guidance.Central bank communication has become an increasingly important monetary policy tool and is widely used by many central banks.Monetary policy is also known as "the art of expectation management".The policy operation can achieve a multiplier effect by effectively guiding market expectations and the expectation effect plays an increasingly important role.Especially in the current circumstances of money forms being rich and varied,financial assets becoming increasingly complex and traditional monetary policy transmission channels being blocked,the importance of expectation management for monetary policy regulation is more prominent.Although China's central bank has not yet take central bank communication as a formal monetary policy tool,but it paid more and more attention to the important role of central bank communication in the management of expectation and also carried out a series of central bank communication practice.Under the new economic development,China's macro-financial regulation and control is also faced with the new requirements and challenges of innovating monetary policy tools and changing the way of policy regulation.The central bank to be included in China's monetary policy toolbox is thetrend,and the expectation management will become the norm of macroeconomic regulation.Therefore,it is of great practical significance,theoretical significance and forward-looking significance to study the role of central bank communication in expectation management and the choice of central bank communication strategy.Based on a comprehensive review of the existing literature,this article revolves around the logical mainline:What is central bank communication-Why should the central bank communication be carried out?-Whether the central bank communication is valid-How to conduct the central communication and answers the above questions from theoretical and empirical point of view.The main content of this paper is focused on three aspects:Firstly,the meaning of central bank communication is clearly defined theoretically,the basis of central bank communication and the important role of central bank communication in guiding expectations is analyzed and this paper analyzes the mechanism of central bank communication based on a simple theoretical model.Secondly,this paper empirically tests the effectiveness of China's central bank communication based on China 's data.The research on the effectiveness of central bank communication is the focus of this paper.This paper examines the policy effect of the central bank communication from three dimensions:the impact of central bank communication on inflation expectation,the impact on exchange rate market,and the impact on financial stability.The empirical results show that:(1)China's central bank communication,the actual interventions can effectively guide inflation expectation,but the guiding effect of central bank communication and actual interventions on inflation expectation is different in a different economic state.(2)Oral communication on exchange rate and actual intervention move RMB exchange rate and it's expectation in the desired direction,oral communication decreases the volatility of RMB exchange rate and it's expectation but written communication on exchange rate doesn't exhibit a significant effect on RMB exchange rate and it's expectation.(3)Central bank communication has a significant positive effect on bank risk-taking.The impact of central bank communication on bank risk-taking is heterogeneous,which differs due to the difference of banks' capital adequacy ratio and systemically importance.Finally,On the basis of conclusion that "China's central bank communication has monetary policy effectiveness”,this paper studies the strategy of China's central bank communication.After the theoretical analysis of the basic principles of effective central bank communication,combined with the China's central bank communication practice,this paper proposes some policy suggestions on how to improve China's central bank communication.