Research On The Effectiveness Of China's Central Bank's Monetary Policy Expectations Managemen

The idea of monetary policy expectation management has a long history,and in1968,when Friedman proposed the Phillips curve containing expectations,he linked expectations to macro policy.The importance of expectation management has been a global consensus,and scientific expectation management has the advantages of low adjustment cost and short policy delay,which can improve the effectiveness of the monetary policy.Many countries have recently approached the lower bound of nominal zero interest rates.The role of traditional monetary policy has been limited.Unconventional policies such as forward-looking guidance have been more widely used,and expectation management has once again become the focus of monetary policy.The People’s Bank of China has not yet touched the lower bound of nominal interest rates,and conventional monetary policy can still be used as a means to adjust the economy.The rational use of expectation management tools can enrich the monetary toolbox of central banks,cooperate with traditional tools,and improve the ability of monetary policy to cope with complex macro environments.Today’s world is experiencing major changes unprecedented in a century,the international situation and the global financial market are facing severe fluctuations.Black swan events such as the COVID-19 epidemic and local wars are frequent.With the increasing connection between global economies,the game of great powers intensifies,the resonance effect of the global financial market is obvious,and the unstable factors at home and abroad are superimposed.These changes require us to re-examine new financial risks from a new perspective and to construct an effective framework for modern central banking institutions with new ideas and approaches.In order to meet the practical needs of China’s monetary policy transformation and the strategic needs of maintaining national financial and economic stability under the development of the new normal,it is increasingly important to improve the scientific expectation management mechanism and correctly and reasonably guide market expectations.As an economic theory,expectation management is developed in the process of applying various expectation formation theories in macro policy studies,which refers to effective guidance,coordination,and stability of expectations.This paper will discuss the micro-mechanism of expectation management from the three dimensions:communication mode,communication objects,and communication timing.We empirically test the practical effect of central bank expectation management.On this basis,this paper specifically analyzes the current institutional environment and implementation status of China’s expectation management and puts forward policy suggestions to improve the expected management strategy of China’s central bank based on theoretical and practical experience at home and abroad.As the People’s Bank of China attaches more and more importance to expectations management policies,its forms of communication have gradually become richer.Therefore,the analysis of expected management in this paper first focuses on the evaluation of the guidance effect of different forms of communication by sorting out the central bank communication events on the official website of the central bank and Sina Weibo and proposing a method to analyze the effectiveness of expected guidance based on two aspects: forward outlook and backward retrospective.After verifying the rationality of choosing the most active short-term treasury bond trading quotation as an alternative to interest rate futures,we identify the unexpected part of monetary policy communication as the policy surprise factor and policy path factor by using a highfrequency quotation.An event study is used to analyze the effect of formal communication and informal communication given by central banks in managing financial market expectations.The results show that the current central bank communication is generally effective,and the communication can affect the interest rate and exchange rate expectations.However,further heterogeneity analysis around the content and form of communication shows that there are still problems such as unclear information in current communication,suggesting the existence of forwardlooking guidance risks.The key to improving transparency is not to increase the number and scope of communications,but to improve the accuracy of communications.Macroeconomics is the result of the expectations and behaviors of a broad public.The research on central bank communication mostly focuses on the reflection of the financial market,ignoring the general public’s understanding of central bank communication.The next topic of expected management analysis is the choice of expected management strategies for central banks when facing different groups.The main focus of this section is how central bank communications can balance brevity and professionalism to reduce differences in public understanding and improve cognitive coherence.Therefore,we first establish a communication model based on the heterogeneity of understanding ability.Theoretical analysis shows that by promoting a more general public understanding of central bank communication,improving conciseness initially bridges the gap between public cognitions;However,the improvement of conciseness is accompanied by a decrease in professionalism,and eventually,the continuous improvement of conciseness increases the divergence of public cognitions.When there are fewer experts with better understanding,the central bank faces a "concise-professional" trade-off,and the public action divergence and the central bank’s communication simplicity show a U-shaped relationship,and theoretically,there is the best central bank communication simplicity to minimize the perception divergence.The weibo sentiment is a transformation of expectations,stock prices are reflections of expectation discounts,and their divergence can reflect the expected divergence to a certain extent.Using Weibo big data and high-frequency stock price data,applying the minute-level high-frequency event research method,and based on the simplicity of text analysis measurement,this paper confirms that the conciseness of Weibo’s attitude divergence and stock price divergence is a U-shaped relationship with the central bank.In addition,the higher the shareholding ratio of professional institutional investors,the smaller the divergence in stock prices after communication;Improved simplicity is more effective in reducing price divergences in stock markets than social media users who lack more expertise.Therefore,the heterogeneity of comprehension determines the shape characteristics of the U-shaped curve.The increasing instability of the macro situation at home and abroad has put forward new target requirements for expectation management: in addition to normalizing and improving the effectiveness of the monetary policy,it is also necessary to take into account the important task of expected stability in turbulent times.Distinct from the above research,this section focuses on the expectation management timing of the crisis and discusses the policy effectiveness of central banks to stabilize expectations.Starting from the puzzle of the Fed’s FOMC premium,this part explores the phenomenon of the existence or absence of stock market premiums before China’s monetary policy announcement and combines the dynamic change of premium with the central bank’s cross-cycle adjustment of monetary policy behavior.We find that when the central bank’s monetary policy operation reflects the protection of social credit creation similar to put options,it can effectively reduce the risk premium of assets,stabilize the capital market,and reduce risk expectations.Based on this phenomenon,this paper constructs a theoretical model,discusses the influence channels behind it,and tests it with empirical evidence.The model derives that under the premise of the objective existence of risk,monetary policy can stabilize capital market expectations by changing the price of risk and reducing the impact of risk on stock pricing.Finally,for other possible explanations of non-central bank operating factors,this paper provides empirical exclusions to strengthen the conclusions of the paper.This study not only discusses the practical effects of the expected management of the central bank of China,but also provides possible improvement directions based on theoretical analysis,which provides new ideas for improving the communication between the central bank and the public,enhancing its policy transparency and credibility,and improving the modern central banking system.In terms of communication methods,this paper applies the event research method with minutelevel high-frequency data for the first time to improve the credibility of guiding causal recognition of central bank communication expectations.Few studies have focused on central bank communication on open market operations.By exploring such communication,this paper innovatively proposes a retrospective perspective different from previous literature to analyze the effectiveness of central bank communication.In terms of communication objects,this paper confirms the impact of the "conciseprofessional" trade-off for the first time,observes the U-shaped relationship between central bank communication simplicity and public perception differences,and expands the research perspective of central bank communication for the public.This paper uses microblog data to construct public expectations and promote the application of social media big data in macroeconomics.In terms of communication times,this paper captures the cross-cyclical adjustment of the PBOC’s monetary policy operation when the economy is facing adjustment,analyzes its effect on stabilizing the capital market,enriches the relevant evidence of the macro-control effect of monetary policy,and helps the central bank formulate and improve policies,stabilize capital market expectations,better support the real economy,and stabilize the macroeconomic market.