China's Monetary Policy Uncertainty: Drivers,Transmission Effects And Policy Coordination

Following the outbreak of the Newcastle pneumonia epidemic,countries around the world began to frequently adjust the policy guidelines and pace of monetary policy to boost economic dynamism and stimulate economic recovery,reflecting the good headwind regulation effect in the course of monetary policy operations.However,the more the monetary authorities' policy control path is dependent on and subject to changes in the economic situation,the more monetary policy uncertainty will grow and grow,which will not only become one of the important factors preventing the macro economy from returning to normalcy again,but also significantly increase the potential long-term cost of policy control.In view of this,this paper focuses closely on the ultimate objective of the effectiveness of policy regulation and the choice of the optimal strategy under monetary policy uncertainty shocks.In terms of the research approach,the paper follows the approach of "analysis of the measurement and change characteristics of monetary policy uncertainty ? study of the drivers of monetary policy uncertainty and its mechanism of action? study of the transmission mechanism of monetary policy uncertainty and its macroeconomic effects ? study of policy effectiveness under monetary policy uncertainty shocks and the choice of the optimal policy mix".The paper proceeds in a progressive manner.The main research work carried out in this paper is as follows:Firstly,based on a comparative analysis of the advantages and disadvantages of typical measures of monetary policy uncertainty,this paper finds that the high-dimensional factor model not only provides an accurate assessment of the unpredictable part of monetary policy,but also has a more objective selection of indicators focusing on multidimensional macroeconomic variables,which is widely applicable while ensuring the validity and accuracy of uncertainty measurement results.It is therefore an effective method for measuring uncertainty in China's monetary policy.On this basis,this paper uses a high-dimensional factor model to measure the uncertainty index of China's monetary policy in a scientific and reasonable manner,and uses the MS-AR model to conduct a comprehensive analysis of the characteristics of the changes in monetary policy uncertainty.The results show that the monetary policy uncertainty index constructed in this paper has good robustness and can better capture and reflect the phase changes in the level of monetary policy uncertainty in China;due to the policy authorities' reliance on monetary policy operations during the crisis,monetary policy uncertainty in China has significant counter-cyclical characteristics,especially when subjected to typical economic and financial events,each uncertainty exhibits a significant localised increase,and the "overshooting" of monetary policy tends to significantly push up monetary policy uncertainty.Secondly,considering that monetary policy uncertainty is both endogenous and exogenous,this paper considers both monetary policy independence and economic(financial)uncertainty to explain the driving effect and mechanism of their effects on monetary policy uncertainty at the theoretical level,and empirically tests the spillover effects of monetary policy independence and economic(financial)uncertainty on monetary policy uncertainty.The study shows that monetary policy independence and economic(financial)uncertainty have significant driving effects on monetary policy uncertainty,while monetary policy uncertainty also has feedback effects on them;the spillover effects between monetary policy independence and monetary policy uncertainty show significant asymmetric characteristics before and after the international financial crisis,while economic and financial uncertainty are dominated by their The driving effect of economic and financial uncertainty is dominant.Further,given that the drivers of monetary policy uncertainty operate under certain dependency conditions,this paper delves into the dependency conditions and state-dependent characteristics of the impact of these drivers on monetary policy uncertainty.It finds that monetary policy independence reduces monetary policy uncertainty in the short run when the exchange rate is highly volatile and capital flows are constrained,while the effect diminishes in the medium to long run;when the exchange rate is relatively stable,increased monetary policy independence suppresses the growth of uncertainty;and when capital openness is high,monetary policy independence and its impact effects are extremely weak.Moreover,in a state of high financial frictions,rising economic and financial uncertainty will induce monetary policy uncertainty,but the smooth operation of the economy and finance will effectively mitigate the interactive feedback effect between uncertainties.Thirdly,this paper focuses on the typical fact that monetary policy uncertainty affects macroeconomic fluctuations in China,incorporates monetary policy uncertainty shocks into the DSGE model,and integrates the dual financial supply and demand friction mechanism to construct a non-linear DSGE model that is consistent with China's national conditions.Through model applicability analysis,it is found that the moments constructed in this paper containing the financial supply and demand friction model can reasonably portray and match the real economic structure of China,and have better practicality.On this basis,the paper systematically illustrates the linkage mechanism between corporate financing demand frictions and bank credit supply frictions,and explores the macroeconomic "crowding out" effect of monetary policy uncertainty shocks through the linkage of the two levers.The findings suggest that financial supply and demand frictions are a key transmission and amplification mechanism for the impact of monetary policy uncertainty shocks in China,with monetary policy uncertainty shocks exhibiting significant cost-push characteristics through the financial supply and demand friction channel;moreover,when individual risk aversion preferences,consumption inertia and policy rule inertia increase,the crowding out effect of monetary policy uncertainty shocks on economic activities is significantly weakened,but does not cause a change in the nature of their transmission.Next,considering that most of the existing studies explore the impact of uncertainty shocks from an aggregate macro perspective,but few studies focus on the structural perspective.On the one hand,the paper explores the time-varying characteristics of monetary policy uncertainty on output(price)volatility in China and its long-and short-term effects by means of the SV-TVP-VAR model,and uses the QVAR model to examine the non-linear response dynamics of consumption,investment and exports to monetary policy uncertainty shocks under different economic and financial situations.The study shows that monetary policy uncertainty significantly exacerbates output and price volatility in the short run,but the amplifying effect on price volatility in the medium to long run is relatively weak due to price stickiness;tighter economic and financial conditions amplify the dampening effect of monetary policy uncertainty on economic growth,while looser economic and financial conditions weaken this negative effect.On the other hand,from a structural perspective,the uneven and heterogeneous characteristics of monetary policy uncertainty on sectoral economic development in China are explored based on the NARDL model.It is found that the impact of monetary policy uncertainty on the sectoral economy in China has a long-term effect and a broad impact,usually exacerbating sectoral economic volatility and slowing down sectoral economic growth,but its effect is mainly concentrated in the tertiary sector represented by the service industry.Finally,as an important manifestation of the applied value and social significance of this paper,on the one hand,based on empirical analysis,this paper systematically examines the response pattern of fiscal and monetary policies and their synergistic regulatory effects under monetary policy uncertainty shocks in China.It is found that fiscal policy is highly sensitive to monetary policy uncertainty shocks;under the overlapping shocks of high monetary policy uncertainty and economic downward pressure,active fiscal policy can not only give full play to its pulling effect on aggregate output,but also weaken the inflationary boosting effect of expansionary policy,and thus can form a complementary effect with monetary policy to "front Fiscal policy can therefore complement monetary policy by "front-loading" fiscal policy to underpin the macroeconomic recovery.On the other hand,on the theoretical side,this paper conducts counterfactual simulations and numerical analysis of a multi-objective policy regulation scheme that effectively responds to the impact of monetary policy uncertainty shocks,based on the non-linear DSGE model constructed in Chapter 5.The study shows that the synergistic regulatory scheme of "accommodative money supply policy + expansionary fiscal spending policy+ debt consolidation policy" has obvious advantages in boosting economic growth,stabilising price levels and controlling debt size,and has significant regulatory effects in mitigating the negative impact of monetary policy uncertainty.