The Study Of Efficiency Of China's Monetary Policy On Price Regulation And Control

As an important economic indicator, Price are closely linked to the macro-economy.It is both hot and cold "conditions " reflecting the market economy, and is also a "regulator " that allocate market economy resources. Price change is always the most important issues of social and governments, It has become the ultimate goal of monetary policy to maintain price stability. The Effectiveness of Monetary policy on Price Regulation and Control directly affects whether a country's economy can run smoothly or not.This article first summarize the research achievement of domestic and international, which provides the basic economic theory for further research. Secondly, the article analyze the implementation of monetary policy in recent years Periodically.From1997 to2010, China's economic situation is stable, financial structure and financial system are more sound, there are important theoretical and policy significance to research the practice of monetary policy in recent years, also we can summarize the characteristics of policy implementation. So this article divide the monetary policy practice into five stages from 1997to 2010 , according to China's cyclical economic fluctuations, This article look back economic conditions in the various stages of review and price fluctuations. Besides, discuss China's specific measures to control prices and its effectiveness.In the empirical part, This article use econometric method to study relationship between the money supply targets M1,M2, the credit indicator credit balance of RMB loans of financial institutions and price index (CPI): (l) Money supply M1, M2 and bank credit LOAN are Granger cause CPI, to some extent, this can explain that monetary policy can be channel through credit channel and money channel to influent the CPI. This also proved monetarist view that the reasons for price changes is caused by money supply, which has some reference to set monetary policy in China. (2) Neither the price nor the money supply Granger cause bank credit, to some extent, which indicates that the endogenous of China's money supply and bank credit is weak (3) The money supply M1, M2 is a Granger cause of bank credit, but bank credit is not Granger cause money supply, which shows the expansion of bank credit is based on the loosened monetary policy of the central bank, that the amount of increase of the money supply will lead to further expansion of bank credit.According to analysis and research, combined with China's basic national conditions, the paper proposes several ways to improve effectiveness of monetary policy on price control. In particular, we need to improve the financial market system further; improve the monetary policy system; optimize the economic of the main system, strengthen the behavior guidance; strengthen monetary policy coordination with other policies.