A Study On The Approach Of Monetary Policymaking

The approach of monetary policymaking is one of the classic titles in the monetary economics. Based on the theoretical and practical analysis, the thesis tries to study on the title and accordingly make some conclusions.Chapter 1 is dedicated to the "Rules vs Discretion" in monetary policymaking. It have evolved from the debates between the Banking School and the Currency School, the Theory of Price Stability of Chicago School, the severe debates between the Keynesian and Monetarism's economists, the Game-based analysis on the micro-mechanism of mqnetary policymaking. During the past more than 150 years, the two approaches dominated respectively in different periods.Chapter 2 focuses on the debate of different monetary policy rules. With the deepening of the "Rules vs Discretion", especially after the collapse of Bretton Woods system, researchers have offered some comprehensive viewpoints on "Rule" and further launched different monetary policy rules. But which had dominant advantage between Instrument rule and Targeting rule or between the Simple Feedback policy and forecast-based policy, was still a dilemma in the circles of monetary economics.Chapter 3 tries to study the approaches of monetary policymaking with the practical view based on the IMF members' monetary policy framework classifications. Exchange rate anchor, mainly adopted by developing economies, are facing big challenges under the circumstances of open economy; monetary aggregate framework was given up by industrialized economies due to the impact of financial liberalization. Inflation targeting framework has become more and more popular as it is essentially rule-based discretion. China now adopts two nominal anchors in the monetary policymaking.Chapter 4 concludes that central banks should prefer to choose the rule-based discretion in the monetary policymaking with which the operation is firmly under control due to the pre-commitment and the flexibility can also be guaranteed. In order to implement the rule-based discretion, targeting a nominal anchor, high transparency and impendence of monetary policymaking, the coordination among macroeconomic policies should be enhanced. China should strive to reform the two-nominal-anchor framework and adopt the inflation-targeting framework.