Research On The Choice Of Monetary Policy Tools From The Prospective Of Exchange Rate Pass-through

This paper constructs a DSGE model with micro basis under the condition of open economy.In this dynamic stochastic general equilibrium model,home country refers to China that exports goods to other countries,while foreign country refers to other major economies in the world,including the United States,there are three types of subjects: domestic and foreign representative families,manufacturers and monetary authorities.In the economic environment of RMB exchange rate marketization,taking into account the influence of RMB exchange rate,this paper simulates and analyzes how the price type and quantity type monetary policy rules will regulate the open economic society in the face of exogenous shocks from different sources,in order to provide reference and reference for monetary authorities how to deal with different kinds of exogenous shocks and trade-off between quantitative and price monetary rules under the influence of exchange rate linkage.In the model,the representative families maximize their lifetime utility discount function under budget constraints by choosing their own labor supply time,consumption of domestic and foreign products and the actual money balance.When manufacturers produce differentiated products,they use Calvo cross pricing method to introduce viscosity price hypothesis,and make production decisions based on the principle of maximizing the net present value of their profits.Monetary authorities mainly consider making monetary policy tools of price type or quantity type to regulate the economy.In order to investigate the choice of monetary policy tools in China,it is assumed that foreign monetary authorities always maintain the price type monetary policy,i.e.Taylor rule.This paper investigates the implementation of price monetary policy instruments and quantitative monetary policy instruments in China.At the same time,in order to consider the impact of exchange rate transmission on monetary policy tools,refer to Engel(2011),this paper assumes that the law of one price is not necessarily true,and measures the degree of deviation of the law of one price by defining currency dislocation,so as to introduce the situation that the exchange rate is completely transmitted and the exchange rate is completely not transmitted when the manufacturer sets the export price into the analysis.Finally,considering the cost impact and productivity exogenous impact of domestic and foreign countries,this paper analyzes the dynamic adjustment process of the economy from the stable state to the new equilibrium state of commodity market and money market clearing,and tries to measure the social welfare loss that can occur in the process of returning to the new stable state,so as to provide basis forchoosing a satisfactory monetary policy tool for the local monetary authorities.According to the source of exogenous shocks,policy recommendations are to accurately study and judge the transfer effect of exchange rate on price changes in the process of international commodity and capital exchanges,and properly complete the transition to price-based rules.Before the end of this process,the quantitative rules should not be abandoned completely,and the short-term regulation of interest rate which includes the adjustment target of macroeconomic variable,and a long-term regulatory mechanism of monetary policy with the money supply as the basis should be both established.