Research On The Coordination Of Framework Between Monetary Policy And Macro-prudential Policy

After the sub-prime mortgage crisis and the global financial crisis, macro-prudential policy is highlighted when micro-prudential policy is out of order. Financial regulators in each country as well as international financial organizations, give a high attention on it. The theoretical and practical circles focus on the relationship between monetary policy and macro-prudential policy. It is a popular topic that how to coordinate the framework especially the instruments of monetary policy and macro-prudential policy with theoretical value and practical value. If we know how to coordinate them, the economic and financial systems will be in the state of price stability and financial stability and be more healthy. And it is the key of the financial regulatory reform in our country.The study of the theory of macro-prudential policy has made some progress, such as macro-prudential policy, systemic risk, financial stable and the relation between monetary policy and macro-prudential policy. In this paper, based on the research of predecessors, firstly, we make a brief overview of macro-prudential policy theory, including its comparison with micro-prudential policy, objects of supervision, dimensions, instruments, principles and implementing organization. Secondly, we try to build financial stability index, use CPI and the financial stability index to measure the degree of t price stability and financial stability, and put the CPI and the financial stability index into a model called Willem signal model. There are nine combinations of price and finance with 5 kinds of signals. Then, this paper briefly introduces the monetary policy in China. The instruments of macro-prudential policy from time dimension and cross-industry dimension are emphatically introduced, but the instruments are lack of innovation. The using condition of instruments are also introduced in China. And then, on the basis of target coordination, we take the deposit reserve policy as the representative of the monetary policy instruments, and analyze the effect of monetary policy instruments to the goal of financial stability with positive analysis method like VAR model, granger causality test. We listed the implementation of macro-prudential policy instruments after the financial crisis, as well as China’s CPI, just try to explain macro-prudential policy instruments how to influence on price stability. From the respective of transmission mechanism of the policy instruments, this paper further expounds the correctness of the empirical results. At last, it is concluded that monetary policy and macro-prudential policy is to be able to coordinate with each other. The idea of instruments coordination is put forward. When monetary policy is used, its impact on financial stability should be taken into consideration. In the meantime, when macro-prudential policy is used, its impact on price stability should be taken into consideration. Monetary authorities need to carefully consider the connection between the two policies and the degree of their influence and the specific instrument with its operating force.We China need a series of reform and innovation to coordinate monetary policy and macro-prudential policy preferably, such as building macro-prudential policy framework which is counter-cyclical and suitable in China, having more focus on the coordination of monetary policy and macro-prudential policy research. So China will have an impeccable regulatory framework.