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The Constraint Effects Of Government Debt On Monetary Policy

Posted on:2017-01-15Degree:MasterType:Thesis
Country:ChinaCandidate:H L GongFull Text:PDF
GTID:2309330485474902Subject:Finance
Abstract/Summary:PDF Full Text Request
Since the outbreak of the global financial crisis in 2008, in order to stimulate the economy and to prevent a sharp economic recession, the world’s major economy entities have implemented proactive fiscal policies and easing monetary policy, which directly lead to the significant growth of government debt levels. The government debt-GDP ratio of many reached a high level in recent decades. In this case, the impact of government debt factors on monetary policy may be more significant.In recent years, under the background of China’s financial reform, along with the interest rate market more and more deeply, the interest rate rule for monetary policy is more and more important in terms of monetary policy and macro economy operation.From this perspective about the Taylor rule, the research idea which adds the government debt factors into the interest rate rules of monetary policy, provides a new direction and train of thought for studying the effect of government debt on monetary policy. Researching whether government debts have an influence on the interest rate response of the central bank toward the expected inflation and whether high government debts will have constraint effect on the central bank’s monetary policy operation, it has an important significance for monetary policy, and should be worth for our further research topic.This article first summarizes the related theoretical basis about the government debt and monetary policy interest rate rules, and then discusses the mechanism of government debt on the impact of monetary policy, then the paper focuses on the empirical research of the third chapter, this article extends Taylor rule, establishes the multivariate threshold model with contain government debt constraint. It’s investigate whether government debts have an influence on the interest rate response of the central bank toward the expected inflation using the multinational macro data. Both theoretical model and empirical model suggest that the high government debts could exert constraint effect on the monetary interest rate policy, the interest rate response toward the expected inflation will fall as debts increase beyond a certain threshold level. Themonetary policies by the central bank to raise the interest rates for curbing inflation are influenced by the pressure from the high cost of government debt. The fourth chapter is the relevant countermeasures and suggestions and mainly aims at the situation in our country, especially under the background of interest rate marketization, some relevant recommendations are proposed about the coordination mechanism of government debt management and monetary policies. This paper summarizes the main conclusions, and finally put forward and future research prospects, in the next step research work can find debt management and monetary policy coordination with the methods and measures, and strive to create a stable macroeconomic environment.
Keywords/Search Tags:Government Debt, Monetary Policy, Taylor Rule, Constraint Effect
PDF Full Text Request
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