The Taylor Rules Of Development And Application In China

Monetary policy rules is the guiding principle of the central bank to make decisions and operate for monetary policy, the Taylor rule is a widely used and effective rules."The people’s bank of China" was issued in March of1995, in article3clearly stipulated that "monetary policy goal is to keep the currency stability, and thereby to promote economic growth." This is from the law to make clear the ultimate goal of China’s monetary policy of "keep monetary currency stable", the intermediate and operational goal of monetary policy has shifted from the scale of lending to the money supply and base money. Some scholars believe that the achievement of China’S monetary policy on the intermediate goal of money supply is well, but on the ultimate goal of price stability is not significant. Therefore, the problem that whether the money supply is still a useful intermediary goal or there is a better policy instrument, has become the current hot topic.With the trend of market-oriention of our economy, the adjustment function of monetary policy to macroeconomic is more and more prominent. At the same time, many domestic scholars argue about how to regulate the economy through the monetary policy, discretion or policy rule and what kind of the rule the central bank use. This dissertation started from the study of Taylor-type rules, then applied them to test our country’S monetary policy, and got the conclusion.Based on the quarterly data from2001to2011, this dissertation examines the applicability of Taylor Rule, interest—rate—smoothing rule and forward—looking rule. Model test results show that the goodness-of-fit of the Taylor rule is low, not well described the change in interest rates track; Add interest rates smooth factors, goodness-of-fit dramatically improved and its value is very big, for0.8826, so the interest rate rules value can best fit on China’s monetary policy, and the coefficient of the smooth is0.7313and the t statistic is very significant, it shows that interest rate regulation has the tend of interest rates to smooth in our country at present, and this kind of behavior is the people’s bank deliberately, keeping rates steady is also one of the goals of China’s monetary policy; Compared to interest—rate—smoothing rule, although forward—looking rule still can better describe interest rate changes in our country, but this rule is not suitable as China’s monetary policy tool rules. Reason is that on the one hand, compared to interest—rate—smoothing rule, goodness-of-fit of forward—looking rule is lower, on the other hand, the coefficient of prospective factors is very small, and the p value is bigger. Interest—rate—smoothing rule can provide a reference to measure the tightness of monetary policy. We have got the similar conclusions with many domestic scholars, that our monetary policy is an unstable monetary policy rules. In this situation, there is a self-fulfilling mechanism about the emergence and development of the inflation or deflation.The results of the regression show that monetary policy in Our country must be systematic. Interest-rate-smoothing rule can be used as the instrument of the monetary policy rules and the model can establish a specific and observable target to the monetary policy, enhance the accountability and transparency, form stable market expectation, and finally improve the efficiency of the monetary policy stabilizing economy.