Study Of China's Monetary Policy Stability

This paper studies the stability of monetary policy. From the macroeconomic operation perspective, the stability degree of monetary policy determined whether the central bank can create a stable monetary environment for the economy. From the perspective of theoretical, the stability degree of monetary policy will cause a noticeable disturbance for other macroeconomic variables. Looking at China's monetary policy practice, the changes in monetary policy trend sometimes was tightening and sometimes was expansion. Central bank frequently used various monetary policy instruments and occured intense directly change, it shows that China's monetary policy do not exist a stable time series. In this paper, I tentatively discussed the stability of China's monetary policy by qualitative analysis method and empirical analysis method.In this paper, I firstly analyzed the concept of monetary policy stability by comparative analysis between Irving Fisher's policy advocates,the "single rule" of Milton Friedman and the "discretion monetary policy" of Keynesian, and clearly known what is the monetary policy stability. I analyzed China's monetary policy by qualitative analysis method and empirical analysis method. In the qualitative analysis, from the perspective of the overall orientation of monetary policy changes and the perspective of the using of monetary policy tools, China's monetary policy is unstable.In the empirical test, mainly from three perspectives, firstly, for the China's monetary conditions index test; secondly, for the actual results of economic operations analysis; and finally, for the co-integration test and granger test between policy stability and inflation rate. The empirical test results showed that the stability of China's monetary policy is lack of stability, and the results of stabilizing economy of such an instable policy are also unsatisfactory. The instable monetary policy caused economy instability instead of stabilizing the economy. Therefore, in order to make monetary policy is able/to create a stable monetary environment and maintain stable and rapid development for the national economy, the central bank should enhance the stability of monetary policy. Finally, I proposed four pieces of suggestions:Firstly, abandon the "discretionary monetary policy" and adopt "rule-based" monetary policy; Secondly, enhance the independence of central bank; thirdly, make the monetary condition index as a reference for the drafting of monetary policy by the central bank.