A Quantitative Study About The Validity Of The Intermediate Target In China

As the bridge where the monetary instruments get in touch with the final goal, intermediate targets have very important function in the monetary policy. Its validity has determined the implementing effect of the monetary policy directly. In 1996, in order to adapt to the economic system reform of our country, the People's Bank has finished the credit scale as ten -year long history of intermediate target of monetary policy of our country, then adjust and control the money supply, regard M1 as intermediate target, observe the value of M0 and M2 as assisting at the same time. In initial two years after adjusting, the monetary policy played an enormous role in maintaining prices at a stable level and promoting economic development; But as time goes on, because the economic environment has changed enormously, the implementing effect of monetary policy has been queried more and more, so whether money supply is suitable for acting as the intermediate target sequentially receives extensive concerns. Under this circumstance, probing into the validity of the money supply goal undoubtedly has a very important academic and realistic significance.Aiming at this realistic problem, this paper begins its studies. Choosing the quarter datum of the relevant economic variable from 1996 to 2005, it treats quantitative analysis as the main fact, combining qualitative analysis. According to the standard for selection of intermediate target, it systematically evaluates the validity of money supply, the current intermediate target, from its mensurability, pertinence and controllability. After drawing the conclusion that the validity of money supply goal has become weaker, it probed into the orientation of intermediate target of our country's monetary policy in the future according to the detailed conditions of our country.The full text can be divided into three parts. Part one reviews the relevant theories and historical development of intermediate target of the monetary policy briefly; Part two is a focal section, studies the validity of the intermediate target from mensurability, pertinence and controllability separately. Among them , while studying the pertinence, it firstly analysis the association between money supply and final goal using the theory of cointegration. Then based on the foundation of vector auto-regression model, applies impulse response function and variance decomposition to study the time lag of the monetary policy. So the paper roundly shows the relationship between the money supply and the final goal. While studying the controllability , it turns the controllability problem into the endogeneity of the money supply, utilizing Granger causality test to find the economic variable that influences the money supply in our country. Thus it offers effective argument for appraising the controllability of intermediate target. The conclusion of the demonstration shows that as intermediate target, the validity of money supply has reduced by a long way, because its mensurability, pertinence and controllability all have some problems. On...