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China's Monetary Policy Intermediate Target Selection And The Effectiveness Of Empirical Research

Posted on:2005-05-22Degree:MasterType:Thesis
Country:ChinaCandidate:L KangFull Text:PDF
GTID:2206360122980615Subject:Finance
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Part One: The main content In the market economy, intermediary targets are the meeting and transmission point of monetary policy by which the central bank influences the macro-economy as it expects. The choice and revision of intermediary targets straightly decides evaluation on monetary policy's effect, so it is the crux for central bank to make monetary policy. Taking it into account, the thesis analyzes the choice of monetary policy's intermediary targets and its validity from four respects, and draws the conclusion. The thesis has five chapters as follows:The summary and review of domestic and overseas theories on intermediary targets of monetary policy, the advance about it at home and abroad, the positive analysis on it in the domestic and overseas, the positive analysis on the validity of it in China, and the conclusion.The first chapter mainly reviews the domestic and overseas theories about the intermediary targets of monetary policy. Among them, the long term interest rate is chosen as the intermediary target by Keynes school, and money supply chosen by Monetarism, the interest rate chosen by horizontalism with consideration that the interest rate elasticity of the monetary demand is very high, and William Poole thinks that the choice of intermediary' s targets must depend on two factors: First is which is more unstable between the actual economy and money. Second is the slope of IS and LM curve. Domestic disputes focus on which is the best choice among interest rate, money supply and exchange rate. The second chapter reviews the advance in the field in the domestic and overseas,among which, the U.S.A, Germany, Britain, Japan and China's cases are focused on. Based on, the author draws the conclusion: The choice of the monetary policy's intermediary target in the western countries can roughly be divided into three stages. From the 1970s to the 1980s, most countries had the same choice, namely money supply. From the 1980s to the 1990s,disagreement happened between these countries,for example,the interest rate for the U.S.A and Japan, money supply for Germany, exchange rate for Britain. Since the 1990s, almost every country gradually replaced money supply with the inflation rate as intermediary's target of the monetary policy. In some degree, the history of the monetary policy's intermediary target in the western countries probably indicates its advance in China in the future.The third chapter mainly reviews the results and conclusion of the positive analysis on this topic both at home and abroad, among them is the vectorial modeling of autoregression (VAR), which is not detailed, but mentioned as an introduction to Chapter Four.The fourth chapter is the core of this thesis, which analyzes the validity of intermediary target of China's monetary policy by positive approach. Firstly the analysis through some statistical graphs shows that the money supply is not a good choice which is charatered by relevance, measurability and effectiveness. Secondly the thesis makes a vectorial model of autoregression (VAR ) including the increase rate of GDP, CPI, M2, RR and ER. Based on the analysis on VAR and IRF within the model, the conclusion is drawn: in a short run,monetary policy has an impact on the real products ,which characterizes China by " the monetary policy is not non-neutral in a short run ". In a long run, the total amout of money supply can hardly push the real products, which is attributed to the relief mechanism in the transmission mechanism of monetary policy. So China is chartered by "the monetary policy is neutral in a long run". Furthermore, the price is hardly kept stable in case of the expected money supply because the M2 is less relevant to CPI. And this proves the fact that the monetary policy is less useful in the post 1990s in China. Compared with money supply, the RR become more and more important. It is demonstrated in two sides: (1) Interest rate continuously has positive multiplying effect on the real products in contrast to its negative multip...
Keywords/Search Tags:the intermediary target of the monetary policy, VAR, IRF, Variance decomposition
PDF Full Text Request
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