Empirical And Theoretical Research On The Choice Of Monetary Policy Rules

Researches on economic growth and economic fluctuation have always been the two important topics in macroeconomic study.Since the Reform and Opening,China has maintained a long-term rapid economic growth.However,Under the background of the rapid economic growth,the economy has experienced large fluctuations.Because of the imperfect transmission mechanism of monetary policy in China,monetary authorities usually use monetary supply rule and the interest rate rule simultaneously or alternately.Then under the current macroeconomic background,we want to know which kind of monetary policy in China can be more effectively in regulating output and inflation?In this paper,We first clarify the transmission mechanism of monetary policy in theoretical level,and sort out the evolution of the transmission mechanism of monetary policy in China to understand in different Stages of China's Development which kind of transmission mechanism of monetary policy works,and after analyzing objecticve reality of the existence of shadow banking,financial disintermediation,interest rate liberalization promotion,interest rate corridors,and financial product innovation,we have found the objective factors of transforming the intermediate target of China's monetary policy.In this paper,we first construct a vector autoregression(VAR)model to empirically compare the effectiveness of quantitative and monetary policy rules,Then by building a Dynamic Stochastic General Equilibrium(DSGE)model framework to compare the effects of domestic monetary policy shocks and foreign technology policy shock on the output gap and inflation when monetary authorities adopt three different monetary policies(quantity rule,price rule,hybrid rule).Empirical result shows that price rules are superior to quantitative rules,at the same time,the quantity rule is still effective,Given that China already has the macro and financial background for the transition of monetary policy,it is necessary for China's monetary policy intermediary target to transform from quantitative regulation to price regulation.The results of the impulse response function of the DSGE theoretical model indicate that compare to a single monetary policy rule,the hybrid rule is better in regulating economy,In the short term,money supply will continue to play a role as an intermediary target for monetary policy,and there are comprehensive factors in the implementation of monetary policy transformation.Therefore,the central bank should comprehensively use quantitative and price monetary policies to control macroeconomic effectively.But in the future,as China's further opening up,interest rate marketization's further advance,price rule will be a dominant approach in regulating the economy.