China's Monetary Policy Choice And Economic Fluctuations Under Open Economy

Monetary policy in an important tool for the country to achieve macro-control goals of price and financial stability,full employment and balance of payments.As the central bank of the world's biggest emerging and transitional economy,PBC actively explore policies based on the different development stage characteristics of China,successfully promote stable economic development and achieve other world-renowned achievements.However,there are various monetary policy operation rules,and different rules have significant differences in the transmission channel and impact on the macro economy.Therefore,it is always a hot topic in academia that which kind of monetary rules can central bank adopt to achieve the optimal macro-control effect.This paper chooses to evaluate and analyze the selection mechanism and performance of China's optimal monetary policy from the perspective of social welfare.In the part of theoretical analysis,based on the analysis framework of Gali and Monacelli(2005),we construct an NOEM to model the performance and welfare loss of five main monetary rules under shocks from both in and abroad.In the part of empirical analysis,we firstly construct“Economic Fluctuation Correlation Index”to study China's monetary policy during 2001Q1~2017Q4.Secondly,we calculate actual monetary policy operations' deviation value through different methods.On the basis of this,we conduct robustness tests under SV-TVP-VAR model.The main findings are as follows: firstly,different monetary rules correspond to different paths of economic fluctuations.Meanwhile,the impact of domestic and foreign technology shocks on macro-economic variables is different.The impact of domestic technology shock on the domestic economic variables is more intense,such as output gap and inflation rate.Secondly,there exists a same optimal monetary policy when the shocks from both in and abroad,the deviation value of the output gap and interest rate is zero under which rule.Thirdly,the monetary policy with pegged exchange rate system has the highest correlation index during the total sample periods,but the implementation of China's monetary policy is time-varying in the sub sample periods,reflecting the characteristics of discretion.Forth,in recent years,the efficiency of actual monetary policy operations in terms of enhancing the social welfare has been greatly promoted and the actual monetary policy operation gets closer to the optimal monetary operation,which can maximize the social welfare.Based on the conclusions above,we put forward some relevant policy recommendations to transform the monetary policy and to ensure the long-term sustainable and healthy development of economic and finance.