Research On The Intermediate Target Of Monetary Policy Of China

Intermediate target of monetary policy is the key to monetary policy transmission,and monetary supply plays an important role in this process.1990s, because of theimpulse of financial innovation and globalization, western countries had to gave up themoney supply and start looking for new intermediate target. In our country, moneysupply became our intermediate target from1998and has continued since. In recent years,with the improvement in the level of opening up, the wave of financial innovation beganrushing our country and a variety of innovative financial instruments have shocked thevalidity of money supply being intermediate target. We begin to question that whethermoney supply is suitable to continuing to be intermediate target of monetary policy.Based on the theory of the intermediate target and foreign practice, this paper madedeep analysis on the effectiveness of money supply being the intermediate target from hecorrelation, controllability and testability with stationary test, cointegration test, VARmodel, impulse response analysis and some other mathematical models. The results showthat the correlation between money supply and economy has a good performance, but theperformance of controllability and testability of money supply were not satisfactory.However, we can’t lightly give up the money supply’s intermediate target position. Finally,the paper give some advice on the choice of intermediate target of monetary policy fromthree aspects:money supply, interest rate and index models. This paper proposed that weshould adjudge and expand money supply statistics caliber, accelerate interest rateliberalization process and build multi-index models in the choice of intermediate targetof monetary policy.