Study On Selection Of Intermediate Target Of Monetary Policy Of China

This paper studies the theories concerning intermediate target of monetarypolicy, analyzes the variety of intermediate target of foreign countries and ourcountry, verifies the applicability of money supply and interest rate, gives somerecommendations about selection of intermediate target.This paper divides into six chapters altogether. The first chapter isintroduction, including the background of problem, arguments aboutintermediate target, research approach .Chapter 2 introduces the basic theories about intermediate target tomaintain the integrity of research. Chapter 3 summarizes the variety ofintermediate target of foreign countries and our country.Chapter 4 analyzes the pertinence,measurability and controllability ofmoney supply qua intermediate target, believe money supply still has someeffectiveness. And this chapter foresees the prospect of applicability of moneysupply, deduce that the applicability of money supply is declining, and moneysupply will be not suitable to be intermediate target in the future.Chapter 5 analyzes the decisive factors of the interest rate channel,including interest rate flexibility of money demand, interest rate flexibility ofinvestment and interest rate flexibility of consumption. This paper makes aconclusion that interest rate hasn't great effect in the transmission mechanism ofmonetary policy. Before the accomplishment of interest rate liberalization and adeveloped financial market, interest rate can't be intermediate target ofmonetary policy.The last chapter consists of some suggestions. Considering there are nosuitable economic variable which can replace money supply now, this paperdeems central bank should improve the efficacy of money supply by adjustingthe layers of money supply and ameliorating the institution environment;Interest rate liberalization and development of financial market should beimplemented simultaneously, so interest rate can enter into intermediate targetwhen interest rate is competent for intermediate target;This paper points out,although inflation targeting regime can't be carried out now in China, it hasmuch research value and can be a potential selection to intermediate target. Weshould reinforce the researches on inflation targeting regime.