The Study On Efficience Of Our Monetary Policy Basing On Mundell-Flemming Model

The Mundell-Flemming Model is a theory which researches the efficiency of the Financial Policy and the Monetary Policy under different exchange rate systems, it comes to the conclusion that the effect of Stabilization Policy is tightly related to the International Capital Mobility and Exchange Rate System. Nowadays, when our economy is getting closer to the world economy, it is of important theoretical and realistic sense to research and discuss how to apply the M-F Model for China and in which economic environment can our macro economic policy exert its efficiency.Basing on the traditional M-F Model and combining the situation of China, we introduce a modification of the M-F Model which is more closed to Chinese economic environment, and conclude that, in this occasion, our Monetary Policy is lack of efficiency ,while the Financial Policy is more effective under the relative Fixed-exchange rate system and strong capital control. We use practical data to validate the conclusion, and try to analyze the difference between the theoretical conclusion and the practical data.To find out the perfect economic environment to enhance the efficiency of the Monetary Policy, we study the efficiency of the Monetary Policy in different kinds of countries which have different capital mobility and adopt Exchange Rate System. Through the theoretical conclusion and the verified demonstration, we find that it has positive correlativity between the Monetary Policy Efficiency and the Exchange Rate Elasticity, and has reverse correlativity between the Financial Policy Efficiency and the capital mobility. Contrasting the effects of different occasions, we draw a conclusion that under more flexible exchange rate system and stricter capital control, we can make our Monetary Policy exert more effectively. In the end, we discuss the qualification of opening our Capital Account, thinking that the opening of our Capital Account shpuld not be considered until the exchange rate is floating freely, which is the best way to improve the efficiency of our Monetary Policy.