A Study On The Monetary Policy Operations Of The Federal Reserve System Since The 1990s

Monetary policy plays an important role in Macroeconomic Policy. Its the sum of all kinds of macroeconomic measures that use various monetary policy tools to control the monetary quantity and market prices. As an important macroeconomic policy, formulation and implementation monetary policy to regulate economy are the central bank's main functions. As representatives of developed countries, The United States With well-developed financial markets and more sophisticated monetary policy experience. And the Federal Reserve System(the Fed), As the Central Bank of the United States, has its unique in development and implementation of monetary policy to control the macroeconomic .Of course nothing is perfect, The sub-loan crisis sparked by the financial crisis with relevant the improper operation of the Fed. Research on the Fed 's monetary policy course, Select the essence, access to beneficial enlightenment and for further improve China's monetary policy has its positive significance. In addition to introduction to this article, but also includes the following four parts. The first part is the Fed and its monetary policy. In this section, introduction of the institutional setup, policy functions and high degree of independence. The Fed 's main institutions, including Federal Open Market Committee(FOMC), the Federal Reserve Bank, member banks and its Advisory Committee. Various parts of each work together to create a good monetary policy conditions for economic growth. The Fed is responsible for issuing currency, formulating and implementing monetary policy,supervision of the domestic banking system, provide relevant financial services for nationals and enterprises, On behalf of government to trade foreign exchange and gold. Regularly released the economic performance and statistical information to the public . It plays a positive role for the public and the Fed's policy to formate a good expection. In addition, on the application of the three monetary policy tools , in accordance with changes in the economic situation ,flexible adjustment and gradual reduction of the deposit reserve rate and discount rate, emphasis on the open market operations. On the independence of the Fed, with well organizational framework , and in the organization, functions and economic have a high degree of independence, witch are difficult for other countries to aspirin. They are important factors that can take independent policy to achieve economic growth. The second part is theory of operated by the Fed 's monetary policy. This part introduce the origin of monetary policy, recalling the early theoretical studies of monetary policy. Followed by the 20th century 90's drawing the line in two phases ,briefly introduce the theory of monetary policy research of the 20th century 90's , The first stage, the Keynesians and Currency school take intense competition, and their theory of monetary policy have become monetary policy theory. After "Stagflation" economy, the new-Keynesians and the rational expectations school rise their own theory of monetary policy. The core aspect of Keynesian theory is that interest rates are a core aspect conduction. After the rise of the Currency school, two schools take a fierce competition, whether in currency-neutral, the effectiveness of monetary policy, monetary policy and the selection of intermediate target of monetary policy have differences. The second stage, monetary policy regulation has become the focus, choose rules to keep on stability and continuity of monetary policy should be more appropriate. During this period, the focus of the study are the interest—rate smoothing policy rules and inflation targeting rules. Interest—rate smoothing rule refers to the real interest rates as intermediate goal of monetary policy, by controlling the short-term interest rates to make it slightly and gradually along the same direction .With economic changes, interest rates through a slight change in direction to the market to convey a clear policy signal to bring about voluntary to adjust. The Fed 's policy during this period followed the "Taylor rule", and the economic adjustment achieve results. Inflation targeting regime caused extensive discussion in academic community , it is the official announcement of the next period of time to achieve the inflation target or range, a clear recognition of low and stable inflation rate are the most important monetary policy objective in long-term. Although there are still much controversy, but the practice has proved that the implementation of inflation targeting countries that inflation is indeed decreased. The results of this phase are: inflation targeting will become the new policy objectives, while the intermediate goal of monetary policy will be more inclined to price-based indicators. The third part is monetary policy's evolution. Analysis in two parts, the first part of a brief review of the 20th century before the 90's ,take the adjustment of monetary policy intermediary target as the main line, interest rates and money supply as intermediate target policy to adjustment, and achieved certain results. The second part focuses on the United States during the new economy and the new era of monetary policy since the operation for analysis. Alan Greenspan, take the re-rate as a monetary policy intermediate targets, use interest—rate smoothing monetary policy rules, according to fine-tune the macroeconomic situation, the success anticipate of the new economy and promote the rapidly growing, successful response to financial crisis in Southeast Asia, the U.S. economy growth 128 months. Since the new century, with the new bubble economy disappear, "9 ? 11" terrorist attacks, as well as the current global financial crisis, it's monetary policy faced a number of challenges. Beginning of the century, the over-generous policy for the crisis to buy foreshadowing. The Fed cut interest rates decisively and effectively to stimulate economic growth, and made harvest results. Since 2004, due to economic situation and the U.S. dollar as the domestic and international monetary dual status, the Fed continuing to raise interest rates, real estate bubble burst, triggering the sub-loan crisis and eventually evolved into a global financial crisis. Consecutive rate cut since 2007 to ease the crisis has become upset. Objectively speaking, the root causes of the crisis with the American consumer culture and the U.S. dollar dual status, the direct cause is cut interest rates continuously and then raising it, the driving force are financial derivatives and the ineffective supervision. The Fed need to take some responsibility, but the other hand, it take a great contribution for economic stability and growth .The final part is summed up the Fed 's monetary policy. Reflect the characteristics are: First, the high independence of the Fed, directly to Parliament, free from individual and group intervention, have high independence in the organization, functions and economy. Secondly, according to the economic situation changes, the flexibility to choose an intermediary target of monetary policy. Experienced during the period from the interest rate to money supply to changes in the course of interest rates, the Fed 's adjustment policies can work well, of course, the well financial system is also important. But this should not overlook it, especially Alan Greenspan accurates to judge the accuracy of theoretical and applied. Third, accurately applicates the rules of monetary policy. Practice has proved that the " simple rule " and " Discretion. Research " policy rules are flawed, The Fed 's interest—rate smoothing rules used decisively, accurately grasp the situation and adjust it according to the strength and direction of the U.S economy. Fourth, the forward-looking monetary policy and openness, The Fed to determine the economic situation is still good, public policy direction before the operation ,enable people to form accurate expected, it has positive significance for the effective mitigation of economic fluctuations. Of course it also has inadequacies, excessive beleive spontaneous market adjustment, over-advocate for the freedom of the economy, deregulation of the financial innovation and financial supervision of derivatives, so that the spread of crisis, caused by damage to the macro, which is what we must learn of.