Mode Of Operation Of Monetary Policy: Rules And Discretion

Monetary policy plays a key role in macroeconomic controlling andadjustment. The research on the monetary policy has been for far too long. Intheory, to choose the operation model of the monetary policy is to give acomparative study of the rule and discretion, and the study can reflect thedifferences among the different theory of macroeconomics. The essence of thedifference between rule and discretion is about the government function inmacro-adjust and controlling. To use monetary policy according to rule is thetradition which has been run deep in western economics for a long time, and thistradition reflects the philosophical views that the government should handle in thespirit of "laissez-faire", but the discretion tell us that the government should behaveactively to fiat the economic fluctuation.The China's financial circle had seen "strategy-leans against the wind" for along time, and few people gave the different opinions. In fact, during carrying outof the market-oriented reform, market mechanism has been improved day by day,and we have more and more similarities to the western countries in running of themarket economy. Nowadays, we also have to make a choice about the operationmodel of monetary policy. To analyze the developed country's operation model ofmonetary policy, and study the experience of the model's using and choice, isnecessary for us to choose the tidy model.I mainly use the method of dynamic comparative analysis and positiveanalysis to do the study. The whole article is based on the qualitative analysis, andthe quantitative analysis is used as the main antidote. Beginning with the evolutionof American monetary policy's operation model, I compare the advantages anddisadvantages of the different model, and then achieve the experience of the modelchoice. Meanwhile, by study of the China's monetary policy's practice, give thedetail proposal to the choice of the China's monetary policy's operation model. This article is composed of 5 chapters. The first chapter is the introduction tothe operation model of monetary policy, which mainly discusses the idea, thepremise for the theory, the debate between rule and discretion, and details of sometypes of rule. This chapter is the foreshadowing of the article. The second chapteranalyses the practice of American monetary policy from 1950's till now. Thischapter divides the whole period into three stages to introduce the process andeffect of the choice of American monetary policy's operation model. The thirdchapter compares the three stages' operation model of monetary policy individually.In the fourth chapter, I introduce the history of the china's direct control monetarypolicy firstly, then focus on the problems in the current monetary policy's practice.In the last chapter, I put forward that we should fix the rate as the intermediatetarget, and should use the Fed's experience for reference to improve our monetarypolicy's operation model. Finally, provide some suggestions.