Study On The Synergies Of China’s Macro-prudential Policy And Monetary Policy

After the global financial crisis happened in 2007, the international community practiced many changes in terms of financial supervision, and macro-prudential supervision is becoming the focus of reform after this global financial crisis. Although the global financial crisis had little effects on our country’s financial institutions, preventing systemic financial risk is still an arduous task during the period of economic transition. Dealing with the relationship between macro- prudential policy and monetary policy is one of the key issues when constructing the framework of macro-prudential management system. I want to solve two problems in this paper. Firstly, how to set the macro-prudential policy rule can maximize the synergy between macro-prudential policy and monetary policy. Secondly, which policy regime is more beneficial to function the synergies between the two policies?In this paper, I use a dynamic stochastic general equilibrium model of three departments to explore the synergies of macro-prudential policy and monetary policy. This three departments are households, enterprises and government. The households include patient households and impatient households, and the enterprises include intermediate products enterprises and final products enterprises. The department of government also includes monetary authorities and macro-prudential authorities. The innovative contributions are as follows:Firstly, I set different rules for macro-prudential policy in different models, and analysis the impulse response of 2 indicators in aggregate and price level. Secondly, I analysis the difference effects between two different policy regimes(dependent & independent) by modifying the monetary policy function from traditional Taylor rule into expanded Taylor rule to explore which policy regime is the relatively better one in our country.According to the results, I get the following conclusions in this paper:(1) the combination of macro-prudential policy and monetary policy have the synergies. For Loan-To-Value Ratio tool, the macro-prudential policy rule which is set for a simple goal can play a better role on the synergies of them; (2) we should avoid conflicts between different policies when using macro-prudential policy to supervise; (3) it is better to set two independent departments to operate macro-prudential policy and monetary policy, because this regime is more conducive to function the synergies.