A Study On The Optimal Option Of Monetary Police Rule: Based On Modeling The Term Structure Of Interest Rates

The monetary policy rule is considered to provide the necessary decision support for the formulation and operation of monetary policy. It can improve the transparency, credibility and validity of monetary policy decision. A lot of scholars have studied the monetary quantity rule, inflation target rule, Taylor rule, McCallum rule and so on. The relationship between inflation and money supply has gradually disappeared due to the fluctuation of the money demand, which makes the central bank gradually abandon the rules of money supply, and chose the interest rate rules. As a simple rule, the Taylor rule is widely recognized as a full commitment rule, the study shows that the Taylor rule must be forward-looking. This paper is use a forward-looking Taylor rule as the central bank's reaction equation. To the term structure of interest rates alternative forward equation of expected inflation, combine the term structure of interest rates and forward-looking Taylor rule. The total demand equation and aggregate supply equation of the new Keynes are set as the model, and these two equations can be obtained from the empirical regression, and then the social welfare loss function is minimized as the constraint condition, and the coefficient of the monetary reaction function which contains the term structure of interest rate is solved. Lastly, we use the dynamic stochastic general equilibrium analysis method, from the monetary impulse and the technical impact two aspects to appraise this monetary policy rule and the Taylor rule. The results show that the impact of monetary policy under the impact of monetary policy, the impact of output and inflation is smaller and faster return to equilibrium, also, the impact of technology shocks on the output is shorter.