Research On The Effectiveness Of Inflation Targeting

At present,China is in a period of deep adjustment of the economic structure.Monetary policy is facing difficulties.How to choose the optimal monetary policy framework to alleviate the contradiction between growth and structural adjustment is an issue that the current monetary policy should focus on.Inflation Targeting which controls inflation as the primary goal,is re-negotiated.The inflation targeting is a policy framework that uses price inflation as a key policy objective by using a clear inflation targeting to pursue monetary independence and tool independence it allows the monetary authorities to guide the policy in a transparent manner.The inflation targeting can be summarized by four key attributes:policy independence,clear inflation goals,accountability and transparency.Since the 1990s,the Fiscal Theory of the Price Level(FTPL)has begun to rise in academia.This theory argues that the price level is determined jointly by the fiscal authority and the monetary authority,not by any party.Only when fiscal policy and monetary policy operates with each other,the price level can be stabilized and fluctuates within a reasonable range.Based on the above background,this thesis conducts empirical analysis to validate the effectiveness of inflation target in developed and developing countries by utilizing the DID method.First,it selects developed and developing countries' study group and control group,then uses an empirical model to study the effectiveness of inflation targeting in developed countries and developing countries separately.What's more,this thesis introduces panel data regression model to investigate the influence of fiscal policy on inflation in developing and developed countries with inflation targeting regimes.The conclusions are as follows.First,the inflation targeting is effective,that is,IT country has a lower inflation rate than the non-IT country.Second,under the fiscal policy,the inflation targeting is still possible to reduce the inflation rate of the countries concerned and the effectiveness of the inflation targeting is proved.Finally,policy suggestions for China are provided.First,the transitional target system should be implemented in a phased and transitional manner.Second,the implementation conditions should be improved.Third,the core inflation indicators should be introduced and implemented gradually.