The Study On Inflation Targeting And Monetary Policy Framework Adjustment In China

In retrospect, the most significant change in the field of a new monetary policy over the last decade is the formation and rapid spread of inflation targeting, and the subsequent broad discussion and thorough research. Currently, the monetary policy framework with monetary aggregates as the intermediate objective begins encountering more and more challenges which is being conducted in China. Therefore, an imminent issue is how to improve monetary policy framework in China for handling these challenges. This article explores theory and practice of successful monetary policy framework through analyzing inflation targeting, and discusses the possibility of implementing inflation targeting in China and the policy implications of monetary policy framework adjustment.This article consists of6chapters. Chapter one is an introduction to the background and the research significance for topic selection, recent literature, basis of the theory, study methodology.In Chapter2, the author makes a thorough and detailed analysis on the theoretical level and institutional design of inflation targeting from different angles.Based on the analysis on this theoretical level and institutional design of inflation targeting, Chapter3examines the international experience of inflation targeting in order to find the common characteristics of successful monetary policy. Therefore, the discussion in this chapter is not limited to full-fledged inflation targeting country as Chile; it also analyzes the features of these countries, including Germany, known as the pioneer of inflation targeting, and FED, known as "implicit inflation targeters".Chapter4explains challenges to current monetary policy framework in China based on the introduction of current monetary policy framework. The efficiency of this framework depends on three preconditions; however, these three preconditions have encountered various problems, the effectiveness of monetary targeting has greatly reduced. Then, the passage explained exchange rate targeting does not apply to today’s China, too. According to the precondition of inflation targeting, the final section of this chapter analyzed the applicability of inflation targeting in China. In The last, we conclude that, Chinese economy is still in the transition period, all reality shows, China does not have the conditions to implementation of inflation targeting currently; China should implementation of inflation targeting gradually.Chapter5discusses whether China has the necessary to improve the tolerance of inflation or not, and try to set up an appropriate interval target. Before doing these, we first analyze the international common basis for setting the inflation target---the data source of1%to3%. In The last, we conclude that, China should follow the example of Germany, set up a temporary goal (3%～5%) at first, after the establishment of inflation targeting in China truly, then set up a long-term goal as1%～3%permanently. This is exactly the innovations of the article.Based on the above analysis, Chapter6makes a package of policy proposal on the adjustment of monetary policy framework in China.