The Research On Inflation Targeting And The Optimization Of The Chinese Monetary Policy Framework

Inflation targeting was a king of monetary policy frame which was put into practice in 1990 in New Zealand. As a kind of forward-looking monetary policy operation, it has obtained a big success in stabling the inflation and slowing down the real economical fluctuation aspect. Statistics indicated that there were already 25 industrialized countries and the emerging market countries announce publicly up to adopt this system in 2010. The reason to adopt the inflation goal system based on the following argument: First, the majority macro economic scientists believed that the inflation is the only macro economic variable which the monetary policy can affect in a long term. Second, even if is the medium degree inflation can give a harmful effect to the economic efficiency and the growth; Third, to set the price stabilization as the main long—range goal of the monetary policy , enables the public to understand the policy-maker's intention therefore exerts some sanction to the Central Bank and government to some degree.Our country adopts the monetary policy which is called"discretionary"for a long time, and takes the money supply as the intermediate target. But the money supply surveys become more and more difficult along with the deepening of the financial innovation and the financial globalization. As a result of the currency multiplication diversities all the time along with the financial environment's change, therefore the execution of the monetary policy which operation index is the money supply become more and more complex. In fact, the deviation happens frequently between our country real money supply and the money supply goal, thus the monetary policy serves the anticipated purpose with difficulty.At the same time, the huge foreign exchange reserve and the favorable balance of payments, the huge population scale and the employment pressure, the formulation and the implementation of our Chinese monetary policy can not only pay attention to the exchange rate and the employment question .So based on our country's realistic national condition, the monetary policy formulation carries unceasingly on the balance in several ultimate objectives. But overall, this "discretionary" monetary policy implementation is using frequency, effects of monetary policy has become more and more unstable, not only expanded the frequency and magnitude of economic fluctuations, but also the loss of economic welfare is increased. Based on the above reasons, this article is trying to build an eclectic monetary policy framework by studying inflation targeting. Through the clear legislative provisions to control inflation as the primary objective of monetary policy to stabilize inflation expectations, and use the inflation forecast to establish the forward-looking ideas of monetary policy for preventing inflation, ensure economic grows sound and fast.