A Comparative Study Of China's Monetary Policy Rules Augmented With Asset Price Index Based On The SV-TVP-VAR

At the beginning of 2019,the Central Bank of China clearly pointed out that we should rely more on price regulation and guidance to improve the quality of economic growth.At present,interest rate marketization is still in its infancy,and there are still some disputes about the effect of the central bank's price regulation.Quantitative regulation is an important regulation rule of monetary policy in terms of regulation effect and expected management.There has been no final conclusion as to which one is better in quantitative rules and interest rate rules.The impact of asset price fluctuations on the formulation and implementation of monetary policy rules has attracted much attention.There are even rumors that the People's Bank of China may consider buying shares to stabilize the financial market.Therefore,the regulation of asset prices is also a matter of concern.Based on the sample data from the first quarter of 1996 to the first quarter of 2018,considering the time-varying and non-linearity of monetary policy rules,this paper uses the state space model to construct the dynamic asset price index,and then constructs the time-varying parameter structure vector autoregressive model to compare and analyse the three rules.This paper studies the monetary policy rules applicable to the current situation in China,and further studies whether the central bank follows the monetary policy rules to regulate asset prices,and how effective the regulation is.Through this study,we can better analyze the different policy preferences of China's monetary policy operation in different economic periods,different systems and policy reforms,further understand the behavior of China's central bank,and improve the practice of monetary policy.Through empirical analysis,the following conclusions are drawn:the central bank pays attention to asset prices in monetary policy regulation,and asset prices can improve the information of future inflation.For the regulation of output gap and asset price,the central bank prefers to adopt quantitative monetary policy,while for the regulation of inflation gap,the central bank prefers price monetary policy.Compared with price-based monetary policy,quantitative monetary policy has a great degree of regulation and control.Using the time-varying parameter vector autoregressive model,the influence coefficients between variables are significant,which shows that the behavior of the central bank can be better described by non-linear rules with time-varying characteristics.In terms of trend,after the fiscal expansion policy in 2008,the central bank adopted the combination of price and quantity monetary policy rules to regulate inflation in a two-pronged way.Therefore,the central bank uses both price and quantity tools to control inflation.From 1999 to 2010,the central bank adopted price-based monetary policy to control the output gap and asset prices showed an increasing trend,while the use of quantitative rules to control both showed a downward trend.The central bank's regulation of output and asset prices tends to be price-oriented,which indicates that the central bank is reducing using quantitative monetary policy to improve the economy.In the future,the central bank will pay more and more attention to the regulation of price-based monetary policy rules.From the impulse response analysis,we can see that although both quantitative and price monetary policies make regulatory responses in the short and medium term,quantitative rules can have regulatory effects in the short and medium term,while interest rate rules can only see regulatory effects in the long term.