The Study Of China’s Forward Guidance On Monetary Policy And Its Effectiveness

In recent years,forward-looking guidance is becoming increasingly important in the monetary policy practices of central banks,mainly guiding public expectations by disclosing the current situation of domestic economic operation,looking forward to future economic prospects and predicting future monetary policy tendencies,so as to achieve the monetary policy objectives of central banks.Specifically,for China,since the first quarter of 2001 began to release the monetary policy implementation report,People’s Bank of China mainly through this official way to communicate with the public public,which helps the public to clarify the central bank’s policy intentions,and is of great significance to the effect of monetary policy.According to the research needs of this paper,the monetary policy implementation report from the first quarter of 2008 to the third quarter of 2022 is selected,and on the basis of the identification,interpretation and quantification of the monetary policy of China’s forward-looking guidance,and based on the existing theory,with reference to the "volatility agglomeration" characteristics of financial time series,an EGARCH model is constructed to explore the financial market effect and macroeconomic effect of forward-looking guiding monetary policy.The research results show that:(1)Under the premise of considering the internal time lag effect of monetary policy and the external macro environment,the financial market effect of forward guidance is more significant,which can guide the return on assets and its volatility in the financial market to change in the desired direction;(2)China’s forward-looking monetary policy can effectively regulate the macroeconomy,and can guide macroeconomic development in a reasonable direction,stabilize macroeconomic fluctuations,and stabilize economic development;(3)There are asymmetries in the financial market effects and macroeconomic effects of China’s forward-looking guiding monetary policy.Among them,in the stock and exchange rate markets,there is a leverage effect on the volatility of financial asset returns,and there is also a leverage effect in the fluctuation of import and export trade;At the same time,the existence of leverage will have a certain impact on market volatility,thereby weakening the policy effect of forward-looking guidance.Finally,based on the above research conclusions,the following policy suggestions are given for China’s forward-looking monetary policy:(1)The central bank should clarify the forward guidance information and improve China’s monetary policy framework;(2)Forward guidance can play an important role as a tool for central bank emergency management;(3)Focus on interest rate targets that guide monetary policy forward;(4)Forward guidance should focus on systemically important financial markets;(5)Forward guidance should actively cooperate with China’s economic structural regulation.