The Choice Of Intermediate Target Of Monetary Policy In China

Since 2010, The growth of GDP has declined while the Broad money keeps stable. Which arouse suspicion of M2 functioned as intermediate objective of monetary policy. With the development of economy, financial innovation flourish,financial structure of real economy has changed gradually. Under this background, the government released for the first time “social financing scale” and listed in some detail in the monetary policy implementation report of central bank. This move aroused heated debate. Whose central issue is whether the social financing scale is suitable as the intermediate objective of monetary policy. Based on this, this article discusses the choice of intermediate objective that M2 and social financial scale, which can shoulder the responsibility of monetary policy.Firstly, this paper introduces and discusses the main research background and research meaning. The paper also reviews the study of M2, social financial scale worked as intermediate target at home and abroad, sorts out overall framework and the main research thought. Secondly, the related theory about the monetary policy and the intermediate target is summarized. Thirdly, the paper discusses the controllability and relativity of intermediate target theoretically from the conduction mechanism of monetary policy perspective. The author also conducts an empirical research about the controllability and relativity using VAR model Johansen Test. The result shows operating goals have greater impact to M2 rather than the social financing scale, which consist with the theory. On the whole, M2 acts more steady and longer on ultimate target of monetary policy. And M2 is suitable for intermediate target. Additionally, there is no time lag in China’s monetary policy from the real GDP perspective. At last, on the basis of theoretical analysis and empirical results in this paper, the author recommends the corresponding policy.First, keeping on M2 as the intermediate target of monetary policy. Second, the social financing scale works as a supplementary parameter of M2 by making best use of the advantages and bypass the disadvantages. Third,Readjust the statistical coverage of M2 and the social financing scale.Fourth, Learning from the developed countries in the West to accelerate the intermediate target change.