Comparison Of The Effectiveness Of China's Quantitative Monetary Policy Tools And Price-based Monetary Policy Tools

Monetary policy is the general term of a series of policies that the Central Bank of a country or region uses a variety of tools to adjust the money supply,interest rate and other indicators in order to achieve the economic objectives of a specific period,and then affect the total market demand,so as to make the macro-economy develop towards specific goals.In China,the People's Bank of China,as the Central Bank of our country,has flexibly used various monetary policy tools in view of the macroeconomic operation of our country since its establishment.Especially after the outbreak of the global financial crisis,the People's Bank of China has used a series of policy tools to smooth out economic fluctuations and guide economic development back on track.At present,China's economic development has entered “new normal”.While the economy is developing steadily,there are also signs of overcapacity,industrial restructuring and slow economic growth.At the same time,the degree of financial market liberalization has deepened,financial innovation tools have increased,and many shadow banks have emerged which are free from supervision.The financing mode has also changed from indirect lending with banks as intermediaries to direct lending and indirect lending.In the future,with the upgrading of industrial structure and the deepening of financial innovation,China's economic development will not be too smooth.Therefore,a comparative study of the effectiveness of the two kinds of monetary policy instruments in China and the relevant suggestions to the monetary authorities according to the economic development situation are of great significance to the healthy development of China's economy and the reform of the financial mechanism.This paper is mainly divided into six parts.The first part mainly discusses the background and significance of the topic,related literature review,and the main research ideas and methods of this paper,which paves the way for the following research.The second part introduces China's monetary policy,including monetary policy tools and transmission mechanism.This part of the elaboration provides a theoretical basis for empirical research and variable selection in the future.The third part is the design of empirical model.It includes variable selection,data processing,model selection and model design.This paves the way for the empirical analysis of Chapter Four.In the selection of variables,variables representing quantitative monetary policy instruments and price monetary policy instruments are selected to compare the effectiveness of the two instruments.In particular,in the selection of variables for quantitative monetary policy instruments,besides statutory reserve ratio and rediscount ratio,this paper adds window guidance tool index.Window guidance is a kind of exhortational supervision means by which the central bank guides the credit of commercial banks and prevents and defuses financial risks through moral advice.Compared with other policy tools,window guidance is a non-mandatory and moderate tool.However,window guidance is still an effective monetary policy tool because it comes from the central bank,an authoritative government agency.For a long time,according to the economic situation,the People's Bank of China has given window guidance to the scale,structure and direction of commercial banks' loans,and achieved good results.With the liberalization of China's financial market and the deepening degree of economic marketization,how will the effectiveness of this policy tool change? Based on the existing literature,there are few studies on window guidance as a tool of monetary policy in China.We innovatively add window guidance as an indicator in the selection of quantitative monetary policy tools.In terms of model selection,this paper selects the VAR model to test the effectiveness of different monetary policy tools.The fourth part is empirical analysis,including impulse response analysis and variance decomposition analysis.The fifth part is policy recommendations and summaries.Based on the empirical results of the previous chapter and the current economic development situation in China,policy recommendations are put forward according to local conditions: 1.Flexible use of a variety of monetary policy tools,especially to strengthen the use of price-based monetary policy tools;2.To smooth the transmission mechanism of monetary policy,accelerate interest rate marketization reform,encourage the development of small and medium-sized financial institutions,and build a multi-level and all-round financial market;3.Strengthen financial supervision to prevent and defuse financial risks.The last part is summary and prospect.