Study On The Effect Of Chinese Monetary Policy Based On All Previous Inflation Data

Inflation is a complicated and common economic phenomenon in the Macro-economicoperation. On the surface, the general price level keeps a widespread and continuousrisen. The purpose of Macroeconomic regulatory usually contains four factors: economicgrowth, price stability, full employment and international balance of payments. As one ofgoals, price stability is very important in economic control. As price is an indicator ofeconomic changes, inflation usually leads to currency devaluation and makes the marketprice disorder, and then exercises a heavy influence on domestic economy an internationalmarket through trade market.Monetary Policy Validity refers to whether monetary policy can affect the realeconomic operation through various transmission mechanism and achieve the desiredpurpose smoothly. Monetary Policy Validity theory mainly contains two aspects: one isthrough which transmission mechanism affect the real economy, the second one is whethermonetary policy can affect the real economy or not.The purpose of this paper is to study on the Monetary Policy Validity, based on China’sall previous inflation since the reform and opening up, in order to put forward reasonablesuggestions to improve the effect of monetary policy.Inflation and monetary policy are two main lines in this paper. The period after thereform and opening up is divided into two parts according to the market economyexploitation, and every time of inflation in the two periods is studied specifically. Then thispaper makes a particular research on three times of inflation after1993by empiricalapproach. First of all, the causes of inflation are studied, making a conclusion that the risenof product cost, excessive money supply and credit supply are the main causes of the threetimes of inflation. Then this paper make a study on the relevance of monetary policy andinflation, making a conclusion that the monetary policies are effective.According to the above analysis，in the ending of this paper, the suggestions onimproving the effectiveness of Reserve requirement ratio, Interest rate and Open marketoperations are proposed.