The Research On Finance Structure Reform Question Of Village In China

Since the new century, "Twin Surpluses" (Current Account Surplus and Capital Account Surplus) have increased drastically in China's Balance of Payments. Foreign exchange reserves and money supply have been increasing in a big margin, money supply from foreign exchange becomes an outstanding issue, which le to tangible inflation pressure. In order to stabilize RMB exchange rate and avoid inflation, the People's Bank of China has taken a series of measures to sterilize the passively expanded money supply. As a kind of monetary policy, sterilized intervention has a great significance in achieving the monetary policy objective, and maintaining the independence of monetary policy. Based on the analysis of the effectiveness of the sterilized intervention, with the practice of China's intervention in the foreign exchange market, this paper makes a theoretical and empirical analysis in the effectiveness of the sterilized intervention and the impact of sterilized intervention on the independence of monetary policy. The paper investigates the sterilized intervention mainly including issuing central bank bills, raising the deposit reserve ratio is effective in the short run, and have a certain sustainability, which will help to keep the independence of monetary policy. But in the long run, the sterilized intervention has not a continuing effect. Otherwise, the increase of the cost in sterilized intervention will have a negative impact on the independence of monetary policy. Also it will perhaps lead to inflation, high interest rate, exchange rate appreciation and even "stagflation". In the end, the paper puts forward some suggestions for improving the sterilization efficiency and monetary policy independence.