The Quantitative Research On Independence Of Monetary Policy On China Based On The Framework Of "Trilemma"

Today,almost all countries are in the condition of open economy due to intensifying of globalization.In the condition of open economy,it is necessary to consider the external and internal equilibrium for the regulation of macroeconomics and all countries have to face the two kinds of equilibrium.For China,we had a closed economy before the end of 80 s in the 20 th century.However,our country began to involved in the world economy more and more because of the reformation and Openness.The degree of economic openness has improved greatly in our country.Chinese economic liberalization is embodied in strengthening of foreign trade,increasement of international capital inflows,high external debt and the accumulation of foreign exchange reserve,and current account convertibility and capital account convertibility to open up gradually.And in recent years,our government promoting the strategy of "One Belt And One Road" also means that our country is constructing the new pattern of opening to the outside world.As the degree of opening to the outside world constantly strengthen,the contradiction between the internal and external equilibrium becomes more and more obvious,China is also facing a serious problem of "Trilemma".In this paper,we research three aspects of the economic policy,reformation of exchange rate system,opening process of capital account and independence of monetary policy in the condition of open economy based on the framework of "Trilemma" and then we go on in the change of policy coordination.These are useful to enjoy the fruits of economic globalization and coordinate exchange rate policy and monetary policy.It can not only make the foreign exchange management play the role of the firewall,reduce the adverse impact of the international financial turmoil,but also have enlightenment to maintain independence and effectiveness of monetary policy.We select the model of MS – BVAR,We begin the idea of this paper from the development of the theory of "Trilemma".And then we use the index system from forefathers of "Trilemma" to quantitative the three policy goals.Next,we research the characteristics of policy coordination in different stages in China by regression.Then we come to a conclusion that the stability of exchange rate system is the primary goal of macroeconomic.We use MS-BVAR model and impulse response function to analysis the data in the part of empirical to estimate the response of domestic interest rates to foreign interest rates.It is concluded that our country's monetary policy independence have enhanced after 2010 and the change of domestic interest rates mainly due to the policy choice for domestic factors.Finally we suggest about the reformation of exchange rate regime and the opening process of capital account combining with the theory of "Trilemma".We think that the process of capital account liberalization should be carefully organized and we should increase exchange rate flexibility on the basis of maintaining stability.