The Asymmetric Effects Of Monetary Policy On CPI: Analysis Based On The Estimate Of Expectation

With the development of economy, the price of commodities will fluctuated by a small or large margin. For our country,curb inflation, avoid deflation, maintain the stability of price and currency value is the primary goal of monetary policy. And through proper implementation of monetary policy to control the CPI effectively has become the focus of theoretical and empirical research. As the most common monetary policy’s intermediate targets, the two indicators:rate of interest and supply of money, each has advantages and disadvantages.And each dindicator’s specific relationship with the stability of price are different, the existence of difference involves the asymmetric effects of monetary policy.Here we can make a simple explanation for the so called asymmetric effects of monetary policy:different monetary policy’s intermediate targets make different effect on the CPI.In this paper, we first estimate the expectation of CPI, and then we can analysis the asymmetric effect of monetary policy. In terms of specific monetary policys’ empirical:First we build simple linear model between intermediate targets and CPI, and then make nonlinear test for the two linear models, the test results indicate the necessity of adding nonlinear part to both model.Based on the test results, we build nonlinear smooth transition regression model, and find the logical type of STR model can describe the relationship between CPI and monetary policy intermediary variables more precisely.The empirical results show that, when the inflation expectations is higher than3%, neither rate of interest nor supply of money can make good regulation on the inflation. But in the case of that the expectations is lower than the threshold of2.67%, the relationship between the intermediary variables and CPI both in line with the economic theory and can impact CPI effectively. For the empirical results, on the one hand, the influence of money supply to CPI is weakening,this is a major drawback of money supply indicator at the present stage of our county; on the other hand, the marketization of interest rate has not been completed, interest rate can’t regulate the high CPI effectively, so for rate of interest,we need to speed up it’s process of marketization, raising the regulation ability of interest rate.