Research On The Choice Of Intermediate Goal Of China's Monetary Policy Based On The Poole's Theory

The ultimate goal of monetary policy is to achieve macroeconomic objectives such as economic growth, price stability, full employment, and the international balance of payments. However, because of the existence of time lag, as well as the long time necessary to obtain the data of inflation and output, it is necessary for central bank to select a number of short-term and quantitative variables, which are easy to manipulate and highly relevant to the ultimate goal, in order to quickly measure the effect of monetary policy and ensure the realization of the ultimate goal of monetary policy. Those variables can serve as the intermediate goal of monetary policy .The choice of the intermediate goal of monetary policy is of great significance for achieving the target of central bank and ensuring the smoothing development of national economy. But whether money supply as the intermediate goal of China's monetary policy is appropriate is very different between each others in theoretical circles, and there is no specific conclusion, so research on the choice of China's intermediate goal of monetary policy is very important in practice.The analysis on the financial variables as the intermediate goal of China's monetary policy is based on classical Poole's analysis and the latest data. We find that money supply is still the suitable variable as the intermediate goal at this stage, we also conclude that the effectiveness of money supply as the intermediate goal gets lower and lower. Therefore reform measures should be adopted so that money supply play a better role as the intermediate goal at this stage,and in the long term money supply should be replaced with other financial variables.