| The monetary policy goals of China’s central bank,especially in terms of economic growth and inflation,have different preferences,and their preferences for economic growth and decline,as well as inflation and deflation,are also asymmetric.In 1992,the People’s Bank of China proposed that inflation and austerity should be controlled through interest rate regulation.However,the central bank of China has different preferences for inflation and austerity.The interest rate policy regulation in our country is so cyclical,and the central bank conducts monetary policy regulation based on different economic conditions,price indices,and other market environments faced in different periods.This indicates that during periods of inflation and high growth,the speed and magnitude of interest rate hikes by China’s central bank when implementing a tight monetary policy are slower and smaller,while during periods of deflation and low growth,the speed and magnitude of interest rate cuts by China’s central bank when implementing a loose monetary policy are faster and larger.These facts are likely to imply that the response of China’s monetary policy to inflation(high growth)and deflation(low growth)exhibits non-linear and asymmetric characteristics.In addition,China is increasingly emphasizing the management of expectations in the process of monetary policy regulation.The central bank of our country is not a central bank with a single goal of currency stability.The ultimate goal of the monetary policy chosen by the central bank is to stabilize prices and promote stable economic growth.However,there is an inherent contradiction between these two ultimate goals.Therefore,the direction of the People’s Bank of China’s monetary policy regulation often faces a dilemma.When the economic growth target for this year is lower than the expected target set by the government at the beginning of the year,rational citizens will be sensitive to predicting the next monetary policy target of the central bank,thus preparing in advance for the inflation caused by the possible increase in money supply that the central bank may adopt in the future.The goal of China’s monetary policy is to maintain currency stability and promote economic development.China is still in the process of economic transformation,and the implementation of monetary policy is facing many unstable and uncertain factors both internally and externally.Although China’s overall economic resilience is strong,it is facing triple pressures of demand contraction,supply shock,and weakened expectations.Against the backdrop of rapid changes in the internal and external macro environment,how the central bank can more effectively use monetary policy tools has become a focus of academic attention.Existing research has shown that monetary policy regulation exhibits nonlinear and asymmetric characteristics.This article is based on the asymmetric preferences of central banks to theoretically and empirically study the nonlinear,asymmetric,and time-varying effects of China’s mixed quantity and price monetary policy rules.This has important theoretical value and practical significance for optimizing the operational framework and paradigm of China’s monetary policy in different economic environments,and improving the regulatory effects of monetary policy in different economic periods.It can be seen that research on mixed monetary policy helps economic participants to grasp the operational rules of monetary authorities,guide the public’s reasonable expectations of the future economic situation,enhance the transparency of monetary policy operations,and improve the regulatory effect of China’s monetary policy,achieving policy goals of reducing inflation levels,reducing output fluctuations,and promoting rapid,stable,and sustained economic growth.This article examines the operational paradigms of China’s monetary policy in different economic environments and proves that monetary policy has asymmetric,mixed,and time-varying characteristics;Using the nonlinear least squares method,the optimal balance coefficient corresponding to the asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy rules are ultimately obtained;Empirical analysis of the time-varying effects of China’s asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations.This article studies rule-based monetary policy,especially the non-linear and asymmetric nature of mixed monetary policy rules,which helps various economic entities grasp the operational rules of central bank monetary policy,enhance the transparency of monetary policy operations,and improve the regulatory effect of China’s monetary policy,achieving the policy goal of reducing inflation levels and promoting rapid,stable,and sustainable economic growth,Moreover,it provides necessary decision-making support for the scientific and systematic formulation and operation of monetary policy.The central bank has multiple monetary policy tools to choose from.Based on asymmetric preference rules and the current process of interest rate marketization,the central bank’s monetary policy tools present mixed and alternating usage rules,while reflecting the need for further improvement in interest rate marketization,which helps the central bank formulate mixed monetary policy rules that are more suitable for national macroeconomic regulation.In addition,based on the asymmetric preference characteristics of the central bank’s monetary policy,traditional interest rate rules and money supply rules will no longer be applicable.Under the condition of asymmetric interest rate and money growth rate,studying the mixed monetary policy rules under asymmetric rules in China,finding suitable regulatory regions,and helping the central bank formulate more effective mixed monetary policy rules can more effectively control inflation and output,allowing the economy to continue and grow steadily.This article mainly follows the theoretical framework of mixed monetary policy rules,analyzes the asymmetric preference of China’s monetary policy for economic growth,analyzes the asymmetric preference of China’s monetary policy for inflation,and analyzes the mixed and time-varying control characteristics of China’s monetary policy.Based on the theoretical framework and asymmetric preference and mixed time-varying characteristics,empirical research is conducted from two aspects,On the one hand,it is an empirical analysis of China’s asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy,as well as their mixed characteristics,asymmetric preference characteristics,asymmetric response characteristics,and time-varying response characteristics.On the other hand,it is an empirical analysis of the time-varying effects of China’s asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy.This article consists of 6 chapters,with the specific structure arranged as follows:Chapter 1 is an introduction,including the background and research significance of the paper,a review of the current research status at home and abroad,the structure and basic content of the paper,as well as the innovation and shortcomings of the paper,Chapter2 constructs a theoretical framework for mixed monetary policy rules and derives the optimal asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations within this framework.Firstly,taking the asymmetric social loss function with steady-state form as the linear exponential function as the objective function,and the mixed IS curve equation and the New Keynesian Phillips curve equation as the constraint conditions for the monetary policy transmission mechanism,a benchmark framework for mixed monetary policy rules with asymmetric preference characteristics and mixed operation characteristics can be constructed.Secondly,within the benchmark framework of mixed monetary policy rules,optimization methods are used to derive the optimal asymmetric mixed monetary policy rules and the optimal asymmetric forward-looking mixed monetary policy rules.Finally,by simulating the three-dimensional reaction region of the optimal asymmetric(forward-looking)mixed monetary policy rules,the mixed and asymmetric features of the optimal mixed rules are characterized.Chapter3 focuses on analyzing the asymmetric preferences and mixed time-varying regulatory characteristics of China’s monetary policy.Firstly,by analyzing the performance and responsiveness of quantitative monetary policy and price monetary policy before and after the four economic growth stages of the five economic growth stages from 2000 to 2020,the performance and responsiveness of quantitative monetary policy and price monetary policy before and after the five inflation stages from 2000 to 2020 are analyzed.Secondly,by analyzing the alternating and parallel characteristics of mixed regulation of quantitative monetary policy and price monetary policy in different monetary policy cycles of moderate easing,moderate tightening,and moderate neutrality,it is shown that during the cycles of moderate easing monetary policy and moderate tightening monetary policy,monetary policy has significant alternating and parallel characteristics of mixed regulation,that is,monetary policy has mixed regulation characteristics,However,in the stable and neutral monetary policy cycle,the alternating and parallel characteristics of mixed regulation of monetary policy are not obvious,mainly regulated by liquidity tools.Finally,by analyzing the performance of monetary policy in different periods of four different stages of economic growth and inflation levels,it is shown that China’s mixed monetary policy has time-varying regulatory characteristics.Chapter4 empirically analyzes the specific forms and typical characteristics of China’s asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations.Using the nonlinear least squares methods the optimal trade-off coefficient is determined by assigning values to the mixed monetary policy rules and the principle of minimizing the difference in goodness of fit.Finally,the asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy rules corresponding to the optimal trade-off coefficient are obtained.The specific form of China’s asymmetric mixed monetary policy rules can be characterized as follows:the balance coefficient is greater than 1,and the reaction coefficients to the inflation gap and output gap are both less than 0,showing significant smoothness.The relative willingness to stabilize the inflation gap and output gap is stronger,and there is a significant asymmetric preference in stabilizing the inflation gap,while the asymmetric preference in stabilizing the output gap is not significant,And they prefer to stabilize the negative inflation gap and the positive output gap.The specific form of China’s asymmetric forward-looking mixed monetary policy rules can be characterized as:the balance coefficient is greater than 1,the reaction coefficients to the inflation expectation gap and output expectation gap are both less than 0,the absolute reaction coefficients to the inflation expectation gap are both greater than 1 and greater than the absolute reaction coefficients to the output expectation gap and output gap,with significant smoothness.The relative willingness to stabilize the inflation gap and output gap is stronger,There is a significant asymmetric preference for stabilizing the inflation gap and a preference for stabilizing the negative inflation gap,but the asymmetric preference for stabilizing the output gap is not significant.On this basis,the mixed characteristics,asymmetric preference characteristics,asymmetric response characteristics,and time-varying response characteristics of China’s asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy rules were analyzed.Chapter5 empirically analyzes the time-varying effects of China’s asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations.Regarding the structural changes and time-varying characteristics of mixed monetary policy regulation in different stages of economic development,the marginal response coefficients of inflation gap and inflation expectation gap with mixed monetary policy rules,and the temporal variation characteristics of marginal response coefficients of output gap and output expectation gap,By approximating the second-order Taylor expansion of the asymmetric(forward-looking)mixed monetary policy rules to construct the TVP-VAR model of the(forward-looking)mixed monetary policy rules,and then empirically analyzing the time-varying characteristics of China’s(forward-looking)mixed monetary policy rules.Through equal interval pulse response analysis and time point pulse response analysis,the demand shock,supply shock,and Analyze the time-varying impact effects of asymmetric preference shocks and mixed policy shocks on output gaps,inflation gaps,and mixed gaps,respectively.Analyze the time-varying impact effects of demand expectation shocks,supply expectation shocks,mixed policy shocks,asymmetric bias shocks on output gaps,output expectation gaps,inflation gaps,inflation expectation gaps,and mixed gaps under asymmetric forward-looking mixed monetary policy rules.The conclusions and policy recommendations of this article are provided as belows.This article first deduces the optimal asymmetric mixed monetary policy rules and the optimal asymmetric forward-looking mixed monetary policy rules in theory.Secondly,the nonlinear least squares method is used to determine the optimal balance coefficient by assigning the balance coefficient of the mixed monetary policy rules and the principle of minimizing the difference in(adjusted)goodness of fit,Finally,the optimal balance coefficient corresponding to the asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy rules is obtained.Based on this,the mixed characteristics,asymmetric biased characteristics,asymmetric response characteristics,and time-varying response characteristics of the asymmetric mixed monetary policy rules and asymmetric forward-looking mixed monetary policy rules are analyzed.Furthermore,in response to the structural changes and time-varying characteristics of mixed monetary policy regulation at different stages of economic development,the marginal response coefficients of mixed monetary policy rules to inflation gaps and inflation expectation gaps,and the temporal changes in the marginal response coefficients to output gaps and output expectation gaps,By constructing a TVP-VAR model of mixed monetary policy rules,we empirically analyze the time-varying characteristics of China’s(forward-looking)mixed monetary policy rules,and characterize the time-varying effects of China’s(forward-looking)mixed monetary policy rules through equal interval pulse response analysis and time point pulse response analysis.Based on the above conclusions,this article comes up with three policy recommendations.Firstly,the regulation of mixed monetary policy should focus on gap regulation,and mix price based monetary policy tools and quantity based monetary policy tools based on the mixed gap target and optimal trade-off coefficient determined by rules.Secondly,the mixed monetary policy should pay attention to the asymmetric preferences of the central bank,and determine the optimal mixed regulatory region and mixed response coefficient based on the asymmetric preferences of the central bank.Thirdly,the central bank should dynamically adjust the mixed monetary policy response coefficient in the short,medium,and long term,as well as dynamically adjust the mixed monetary policy response coefficient based on the economic stage at the economic time point.The innovation of this article lies in three aspects:firstly,it constructs a theoretical framework for asymmetric(forward-looking)mixed monetary policy rules.Secondly,this article uses the nonlinear least squares method to empirically study the specific forms and typical characteristics of China’s asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations.Thirdly,this article uses the TVP-VAR model to empirically study the time-varying effects of China’s asymmetric(forward-looking)mixed monetary policy rules based on asymmetric preferences and inflation expectations.The shortcomings of this article are reflected in two aspects:firstly,although the(forward-looking)mixed monetary policy rules studied in this article have asymmetric responses to inflation(expectation)gaps and output(expectation)gaps,in fact,the relationship between short-term nominal interest rates and monetary growth is not entirely negative.Therefore,one of the further research directions of this article is to characterize the nonlinear trade-off relationship between the short-term nominal interest rate gap and the money growth gap,and to study the(forward-looking)mixed monetary policy rules of the nonlinear trade-off relationship between the short-term nominal interest rate gap and the money growth gap.Secondly,although this article studies forward-looking mixed monetary policy rules based on inflation expectations,existing research conclusions on single monetary policy rules indicate that the forward-looking nature of monetary policy rules is increasingly significant,and this article does not consider the mechanism of inflation expectations.Therefore,the further research direction of this article is to characterize the micro mechanism of inflation expectations formation and introduce it into forward-looking mixed monetary policy rules. |
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