An Analysis Of Applicability Of Taylor Rule In China

It is necessary for People’s Bank of China to a find a set of suitable instrument rules for our market economy if People’s Bank of China want to achieve the targets of the stability of inflation and the growth of GDP. In1998the Central Bank established the money supply as an intermediate goal position, then the central bank can only choose the monetary base as the operating index, so the monetary base rule has become Chinese Tool-Oriented Monetary Policies Rule. However, in recent years, Chinese foreign exchange reserves has continued to grow which1ed to a passive monetary base running. So the central bank has been difficult to control the money supply by controlling the monetary base because of the strengthening of endogeneity of money base. The policy action which makes the money supply as the intermediate goal is difficult to achieve the ultimate goal of monetary policy. In this case, the research of making the interest rate rules become chinese Tool-Oriented Monetary Policies Rule and the study of the feasibility of interest rate rules in chinese application is forward-looking and important.The innovation of this article: This paper revises the interest rate rule model according to the specific conditions of China, and adopt a more comprehensive and accurate analysis and regression method.