Financial Deregulation And The Validity Of Monetary Policy: Based On Conduction Mechanism

We are now in the world which is experiencing financial reform. With the revolution of electronic technique, large scale of financial innovation and lose of control, there are deep changes in the whole financial system. It's not the same basic background that traditional monetary policy based on. Inevitably it will lash and affect the operation of the policy, and financial deregulation must be a very important factor, although it may not be the only one. We can say the financial deregulation is the most important part of nowadays' financial reform, which is affected by economic and financial environment and affect them also.The first part paves the way for the whole thesis. We inquiry the realistic and theoretic background that financial deregulation based on, expound the argument of mainstream economics, and how they guide the practice.In the second part, we try to focus on an interesting issue, that is how financial deregulation affects control of money and validity of monetary policy. We survey the theories and arguments of financial deregulation, and then describe its contents.The third part will deeply and carefully analyses whether the validity of monetary policy is harmed or strengthened, or to say, what the harm is. The monetary policy has three indirect ways: financial assets prices, or scale and quantity, or expect. Analysis show that the money conduction mechanism is so rich and extensive; each way has its own characteristic and depends on certain factors, and whatever changes in the chain may influence the normal function of the monetary policy; they influence each other and affect together. Financial deregulation thus has deep effect to the middle conduction mechanism of monetary policy. Next, the paper explains factors of monetary policy's validity. We make conclusions that the effection is complicated; it's not simply harmed, but to enhance monetary control has certain conditions.Of course, the purpose is to guide practice. So, in the forth part we survey thefinancial deregulation reform in deferent countries, and try to get some guidance. After inspect the already changes in Chinese financial deregulation, we have enough reasons to argue that there have been significant changes in the whole financial system and environment, although we can see financial regulation here and there. This paper concludes that with the reform deepening and thoroughly opening, the monetary policy must advance with the time, establish new frame of monetary policy, according to the market development. Firstly, raise the position of the Central Bank furtherly, and avoid administrative intervention. Secondly, enhance the independence of monetary policy. Thirdly, quicken the pace of commercial bank reform and interest rate reform. Fourthly, cultivate financial market, and develop a standard market. Fifthly, adjust middle target flexibly, and use suitable policy operation tools comprehensively. Finally, try to improve the environment of monetary policy.