Research on the Current Effectiveness of China's Monetary Policy

Author: Cui Jianzhen
Publisher:
Publish Date: 2006-01-01
Features: With the increase in the dependence on central government debt and the diminishing effects of large-scale fiscal infrastructure investment, as well as the emergence of the "crowding-out effect," active fiscal policy should gradually withdraw from the historical stage, with monetary policy taking the sole responsibility of stimulating domestic demand, promoting economic growth, and even adjusting economic structures. As a result, monetary policy and its effectiveness have become pressing and challenging issues in China's financial sector and macroeconomic field. This book for the first time proposes and comprehensively argues the three theoretical prerequisites for the effectiveness of monetary policy: the nature of money, the nature of money supply, and the value of the Phillips curve. It corrects Friedman's authoritative view that the evaluation standard of monetary policy is the money supply. By using monetary policy objectives as an explanatory variable, it establishes a theoretical model of monetary policy effectiveness in China and conducts empirical analysis based on the country's specific conditions. It also examines the constraints on the effectiveness of China's monetary policy—such as the credit concentration in state-owned commercial banks and the "counter-flow" of funds within the banking system, which negatively impact the effectiveness of monetary policy—and proposes ways to enhance the effectiveness of China's monetary policy.