Monetary Policy After Financial Crisis

In economics,the effectiveness of monetary policy is always the prolonged topic.Although in theory the economists have a heated argument about its effect,in practice each country regards monetary policy as an important means to control the economy.In 2008,the subprime mortgage crisis broke out in the United States,which made all the other countries bogged down in the mire.The phenomenon of liquidity contraction spread to financial markets all over the world,even large financial companies failed to survive.In order to further contain the crisis,various countries adopted various monetary policies to cope with it.From the specific measures,a large number of developed countries led by the United States adopted conventional monetary policy at start and then turn to unconventional monetary policy.Developing countries insisted on using conventional monetary policy until the later period of the crisis.Why these countries adopted different monetary policies and what are the effect? Those are questions worthy studying.In recent years,with the implementation of quantitative easing policy and the beginning of China's market-oriented interest rate reform,economists domestic and abroad have renewed understanding of monetary policy in the new era.Monetary policy contains a lot of contents.Some scholars start with the transmission mechanism of monetary policy to study whether the transmission mechanism of monetary policy is unobstructed and whether it affects macroeconomic indicators.Some scholars have empirically tested the effectiveness of monetary policy from the point of view of monetary policy tools.These studies have led to a deeper understanding of the content of monetary policy,but the analysis of monetary policy is not comprehensive enough.On the basis of the previous literature,this paper analyzes whether the monetary policy of the United States,the European Union,the United Kingdom,China and India achieve the goal of monetary policy.First of all,in theory,it introduces the development of monetary policy and the tools and transmission mechanism of monetary policy.In the empirical analysis part,this paper make use of backward looking Taylor rule to estimate the path of the shadow interest rate and prediction post financial crisis,displaying monetary policy changes before and after the financial crisis.Meanwhile the empirical analysis also validates that whether the monetary policy follows backward looking Taylor rule.Through empirical comparison and estimation,we can have a deeper understanding of the differences between monetary policy and the rules followed by monetary policy.In terms of the effect of monetary policy,this paper analyzes the monetary policy measures of the United States,the European Union,United Kingdom,China and India,as well as economic growth rate,inflation rate and so on.Through practical analysis and empirical analysis,it is found that the deviation on the path of monetary policy in developed countries before and after the financial crisis is greater than that of developing countries.Although monetary policies adopted by these countries are different,the path of unconventional monetary policy is consistent with the trend of conventional monetary policy when not constrained by zero lower bond.As for monetary policy objectives,the effectiveness of monetary policy in the European Union and Britain haven't showed out.China and India,as developing countries,have recovered from the financial crisis before the developed countries.The US economy is under the monetary policy normalization stage,and GDP growth rate,unemployment rate and other indicators are already stable,and at around the target value.Though Chinese monetary policy has achieved the desired results,still at the end of this article on monetary policy research some inspiration would be found.First,adhere to the stage of economic development suiting monetary policy and fiscal policy.Second,strengthen the risk management of financial institutions.Third,increase policy transparency.Guide public money flows.Fourth,in the context of global expansionary policy,we should guard against the spillover effects of developed countries for China.