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Study On Inflation Targeting System And Feasibility Of Its Implementation In Our Country

Posted on:2005-05-19Degree:MasterType:Thesis
Country:ChinaCandidate:G Z MenFull Text:PDF
GTID:2156360125454785Subject:World economy
Abstract/Summary:PDF Full Text Request
Under the inflation target system, the decision base of monetary policy depends on periodic expectation of inflation. If the expectation number exceeds target range, the monetary authority should take necessary measures. Consumer price index is the core one of economic expectation. It renews very quickly. It is familiar by public. It is very credible, and it isn't controlled easily by central bank. So the fundamental method of pegging inflation rate of the monetary policy of a country, which carries out inflation target system, is pegging consumer price index. Most central banks make a narrow target range of 2 percent point in order to guide the expectation of inflation definitely.Central bank can publish monetary policy report and announce it in the official internet. The senior officer of central bank can exchange economy and financial information directly with lots of audience. Central bank can also announce model of expectation of inflation, Through above methods, central bank can transmit the information, including making basis and realizing ways of inflation target number and the reasons of deviation of inflation target, into the public. These encourage the public people understand and joining the course of making policy.Inflation target system is a kind" of "restrained choose as the occasion demands", that is to say, it is a policy frame between simple regulations and "choosing as the occasion demands". Central bank is restrained to do some short-term actions, at the same time it is also authorized certain choosing power as the occasion demands to deal with unexpected or accidental incident.Short-terrn Fillipus Curve indicates that unexpected inflation and monetary increasing should influence employment and output. In the model of explain inflation partiality, central bank can take relaxed financial policy to reduce rate of unemployment after formation of inflation expectation in private sector. So central bank has motives in short period taking expanded monetary policy, and inducing inflation and stimulation economic growth.. From long-term point, it is the best way of eliminating inflation partiality that adding marginal cost of producing inflation of central bank.AbstractWhich ever policy is the game between government and private sector. If private sector can forecast government policy accurately, the "monetary effect" of policy will go. The policy won't have a good result. The degree of trust of the policy authorities will result in different cost in the course of equation of economy. If credit of policy is higher, the lower cost of reducing inflation rate is corresponding. It will hinder the construction of policy credit if the policy authorities lack of consistency. Then the effectiveness of policy will be dropped.Increasing independence of central bank can relax credit problems of monetary authorities, which is caused by information asymmetry. Now there are 3 representative theories on increasing independence of central bank. They are policy prosperity cycling theory of Public Selection School, the analysis method of New Keynes and Dynamic Non-consistent Theory. How to measure independence of central bank is the premise of comparing that from different countries. With different method of measuring independence of central bank, we can get different result of relations among central bank, inflation rate and other macroeconomic index.In recent years, more and more countries carry out reforms to strength the independence of central bank. Those regime arrangement do not mean that central bank must obey the target of government. On the contrary, it ensures the responsibilities of central bank and government. The public can watch the behavior of central bank and government more clearly and supervise them. And it will increase the transparency of policy.There are obvious problems of relationship among controllability and measurability of monetary supply index and national economy in China. There are some difficulties in earring out inflation target system in China. But the favorable environment...
Keywords/Search Tags:Inflation, Target System, Central-Bank Independence, Monetary Policy
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