Analysis Of China's Monetary Policy Validity

Monetary policy has a direct impact on a country's economy, and will play a more and more important role on the macroeconomic stability in today's increasingly globalization economy. As a macroeconomic policy, China's monetary policy is facing more challenges and problems now, and that is the reason I choose this topic to analyze. The thesis is focus on studying the validity of China's monetary policy and implementing problems encountered these years, which has theoretical and actual meaning for the authority to improve the effectiveness of monetary policy.The thesis analyzes China's monetary policy validity from a demonstration point of view, find out the reasons causing the invalidity, and put forward the improvement measure. Firstly, the paper set the theory framework and makes definition of the validity of monetary policy.Secondly, this paper makes a demonstration on the 1998-2008 quarterly series of M2 and loan index by using the VAR model, showing that in general, China's monetary policy is valid and more effective through M2 conduction. In order to be more practical, the paper also research on the details of monetary policy implementing in each period of time based on China's economic growth trend, trying to find specific reasons causing the problems.Finally, based on the analyses above, the paper points out several reasons causing the invalidity and puts forward the general measures to improve China's monetary policy validity.