The Adaptability Research Of Quantitative Rule And Price Rule Of Monetary Policy In China Based On DSGE Model

At present, C hina is in a transition stage of history. C hina continues to promote market-oriented interest rate. The course of RMB internationalization is accelerating. Simultaneously, in the foreign exchange market, C hina adopted a reference to a basket of currencies, and executed a managed floating exchange rate arrangement. In such a case, it is necessary to rethink the applicability of monetary policy rules. About the issue that one country should adopt the money supply rule or the interest rate rule, domestic and foreign scholars ha ve carried out numerous studies, but they did not reach the same conclusions. As a developing country, C hina is in the stage of economic restructuring and financial upgrading. Interest rate liberalization and internationalization of the RMB have not been thoroughly realized. In this case, whether the money supply rule at present is the optimal choice is a problem worthy of deep ly researching. This paper focuses on the following five aspects:The first, this paper analyzed and compiled the relevant domestic and foreign literatures. On the tools of monetary policy rule, there have been controversies in foreign countries. After the choice according to the circumstance, then the money supply rule and the Taylor rule, scholars conducted the continuous improvement and innovation. By conducting empirical analysis, scholars verify the validity of the rules. Unfortunately, They have not yet reached a consistent conclusion. In C hina, scholars have also carried out a series of studies about monetary policy rule. However, due to the use of traditional methods of measurement instruments, most studies lack basic microeconomic theory, and domestic data quality is not very high, scholars’ conclusions are not entirely consistent. Therefore, we believe this point: In the background of accelerating interest rate liberalization, deepening international economic ties and global economic integration, there is a need to rethink the applicability of monetary policy rule.The second, for the shortcomings of traditional econometric model, for example, model set arbitrariness and lacking of a clear economic description about the steady-state. Based on the previous literatures, the model is appropriately improved in this paper. In the process of establishing the model, considering C hina’s commodity and labor market are not perfectly competitive, this paper introduces price stickiness and wage stickiness, and discusses the process of individual economic agents who maximize their objective function so as to make decisions under certain constraints. The established DSGE model can not only avoid Lucas critique, which plays an important role in policy analysis and evaluation, and the model is more suitable for C hina’s actual conditions. Model’s estimation results show that China exactly exist the characteristics of sticky prices and wage stickiness. The improved DSGE model which considered imperfect competition market is better to simulate the actual conditions.The third, the established DSGE model is treated to logarithmic linearization. Parameters of the model are calibrated and carried out Bayesian estimation. DSGE model’s parameters can be divided into two categories according to content. O ne reflecting the steady state characteristic of the model’s parameters, and the other reflects the dynamic characteristic of the model. For the first class of parameters, this paper uses a calibrated approach to estimate; For the second type parameters, this paper use estimation methods to estimate. Estimation results show that Bayesian estimate values of the model parameters under interest rate rule and money supply rule are very close, which indicates that the model has good stability and it is a structural model.The fourth, the regulatory effect of quantitative monetary policy rule a nd price-typed monetary policy rule are compared. The article analyzes the transmission mechanism of monetary policy adjustments on macroeconomic impact of each variable, and the impact effect of monetary policy adjustments on output and inflation. Studies show: from the maximum deviation degree, the maximum output deviation degree’s absolute values of quantitative monetary policy rule and price-typed monetary policy rule are 0.060 and 0.068, respectively. The maximum inflation deviation degree’s absolute values of quantitative monetary policy rule and price-typed monetary policy rule are 0.42% and 1.94%, respectively. Quantitative monetary policy rule is superior to price-typed monetary policy rule. From the time needed to reach the equilibrium, the time that output needed to reach the equilibrium under quantitative monetary policy rule and price-typed monetary policy rule are 18 quarters and 6 quarters, respectively. The time that inflation needed to reach the equilibrium under quantitative monetary policy rule and price-typed monetary po licy rule are 24 quarters and 13 quarters, respectively. Price-typed monetary policy rule is superior to quantitative monetary policy rule.The fifth, from the analysis of the monetary policy’s impact effect and welfare loss, price-type tool of monetary policy rule can have a greater role in less time, so as to realize the low inflation and the stable growth of economic. Compared with quantitative monetary policy tool rule, price-type tool of monetary policy rule can achieve a smaller welfare loss and higher efficiency. Therefore, price-type tool of monetary policy rule is superior to quantitative monetary policy tool rule. It is able to provide better reference for the macroeconomic regulation and control. This paper suggests related policy decision department should gradually take a transition from quantitative monetary policy tool rule to price-type tool of monetary policy rule in order to improve the effect of China’s monetary policy.