The Choice Of American Monetary Policy Intermediary Target And Enlightenment To China

The monetary policy intermediary goal, it refers these financial variables that is easy to regulate by central bank and have the nature of conductivity, which is chosen in order to realize monetary policy ultimate goal. The monetary policy intermediary goal and ultimate goal have close and systematic relations either in the aspect of time or space. It will block the exertion of monetary policy if the monetary policy intermediary goal is chosen incorrectly. The monetary policy intermediary goals that are chosen by the Unite State since the end of World War 2 mainly are: bank credit,interest rate,money supply,real interest rate. The Unite State chose different monetary policy intermediary goal according to different economy conditions, it ensured American economy continually develop that Federal Reserve Board (FED) chose money policy intermediary goals correctly and applied them successfully. This paper research the main theory that affected the Fed to institute monetary policy intermediary goals, expatiate on the evolvement of American monetary policy intermediary goal, and analysis the reason and rationality of the change of American monetary policy intermediary goal. This paper is divided into five parts:The part 1 introduces the paper.In the second part, we research the theory of monetary policy intermediary goal. Monetary policy implements are needed to achieve the monetary policy ultimate goal. American monetary policy implements are: the operation of government securities open market, the demand that discount credit of commercial bank and deposit reserve. The central bank must choose an economy variable as intermediary goal to control in order to realize monetary policy ultimate goals. The choice standard of monetary policy intermediary goal have there: can forecast,can control and has mutuality .currently, money policy intermediary goals that are chosen by each country main are: money supply,interest rate and inflation rate.The monetary policy intermediary goals main have: interest rate,money supply,real interest rate and inflation rate. Economist research extensively about the choice of monetary policy intermediary goals: in 1930's, Keynes putted forward that central bank should choose nominal interest rate as monetary policy intermediary goal. In 1970's, Friedman putted forward"simple rule"of"the stable growth of money supply rule", he considered that the Fed should take the stable growth money supply as intermediary goal. Taylor J. B. (1993) considered the Fed should take the real interest as intermediary goal. William Poole (1970) thought we can draw the conclusion what intermediary goal is more superior to the others through comparing loss function of the two monetary policies, which is deviation variance of the minimum output.The part 3 introduces the evolvement of American monetary policy intermediary goal. The United States mainly chose interest rate as monetary policy intermediary goal from the end of World War II to the end of 1960's; America mainly chose money supply as intermediary goal instead of interest from the beginning of 1970's to the end of 1980's, using M1 mainly as index. The Fed can control inflation and nominal GDP growth by controlling the growth of M1. At the same time using credit gross as minor intermediary goal, but its importance dropped day by day; Money supply growth remained volatile after October, 1987, the United States abandoned the goal to setting up narrow sense of M1, turn to set up the goal of broad sense M2; America chose real interest as intermediary goal since 1990's.The part 4 evaluates the choice of money policy intermediary goal. The stable and divinable relation should exist between intermediary goal and ultimate goal, American monetary policy ultimate goal once was established, and The Fed should choose intermediary goals correctly to match it. Which is more excellent in a certain conditions? William Poole draw the conclusion what intermediary goal is more superior than the others through comparing loss function of the two money policy, that is deviation variance of the minimum output.Poole model proved random structure in economy, which is the different perturbation nature and its relative importance, had decided what the most superior tool to use. The choice of intermediary goals is affected by the choice of ultimate goals and short-term or long-term of intermediary goals. We summarize Poole model: first, money policy reacts according to potential impact, under the condition that the authority can distinguish the potential economy perturbation. Central bank should choose different intermediary goal to counteract the impact. Second, in reality, central bank cannot observe out potential impact directly when they institute the money policy, so they base on forecast values which are the variable reflect economy perturbation. Third, central bank must realize they only can incompletely and the partial information response to economy real condition. In certain economic condition, currency authority realizes monetary policy goal in the short-term through fixing some kind of operation target value or the policy tool value. Along with the information being unceasingly obtained, fixed policy tool should change unceasingly to determine it.The part 5 introduces the enlightenment to China from the choice of American monetary policy intermediary goal. The practice of the choice of American monetary policy intermediary goal tells us, the intermediary goal should have following several characteristics: First, a ideal monetary policies intermediate goal system is decided by it whether has the relativity with ultimate goal, that is to say it whether has the relativity with macroscopic economic movement, macroscopic economic movement mainly points that the long trend of economy develop and inflation. If the intermediary goal displays stability and the relativity well with these two aspects in a longer time, then it is the comparative reliable target system, and is feasible in the actual operation. Second, the monetary policy intermediary goal should be the dynamic target complex. The original intermediary target complex or the macroscopic economy and the inflation relativity possibly twists even destroys along with a national macroscopic economy movement condition changing and financial management and movement structure changing, The monetary policy intermediary goal should make the corresponding adjustment. It is not advisable to fix a certain intermediary goal. Third, the intermediary goal not only is qualitative, moreover is the quota concept. So, it is macroscopic comprehensive system unifies function of Central Bank to research money policy,statistics and forecast. Fourth, Along with the economical development and the finance deepening, it is more and more difficult to find the intermediary goal that has long-term stable relation with economy, and the research of intermediary goal will be in a more widespread level.Currently, monetary policy intermediary target of China still is the money supply, taking money supply as the intermediary goal has the reality foundation, but the disadvantage of money supply as intermediary goal also emerge day by day, inflation rate as intermediary goal value is worth researching, it is inevitable trend that Chinese choose interest as intermediary goal with the develop of China, it is necessary to sweep clean barrier and speed up interest market reform.