Multi-objective: Realistic Choices of Monetary Policy during China's Transition Period

Author: Chen Tao
Publisher:
Publish Date: 2006-09-01
Features: On how the ultimate goal of monetary policy should be chosen during China's transition period, the theoretical community has long been engaged in debates over single, dual, or multi-objective approaches. After the passage of the "People's Bank of China Law" in 1995, most scholars have accepted the view that price stability should be fixed as a primary or secondary goal. However, the debate over monetary policy objectives has not ended there. From the operational practice of China's monetary policy, the central bank has always been constrained by multiple objectives from the government and has had to pursue and balance them. How to explain the discrepancy between the theoretical and practical levels of monetary policy objectives? Is it a distortion in the behavior of the government and central bank, or an inevitable institutional arrangement that aligns with China's reform process? What is the relationship between a country's choice of monetary policy objectives and its economic system and stage of development? Does China have the conditions to implement a single-objective approach? These questions remain largely unaddressed by systematic and in-depth research. Comrade Chen Tao's monograph, "Multi-Objective: A Realistic Choice for China's Monetary Policy during the Transition Period," once again clearly advocates for a multi-objective approach. While challenging the single-objective theory, it provides an in-depth and innovative analysis of the necessity, coordination, and effectiveness of multi-objectives. Compared to previous multi-objective theories, this book has the following features: First, its analysis of China's national conditions during the transition period is realistic, closely integrating monetary policy theory with China's practice. Second, in response to the criticism of the coordination of objectives in the single-objective theory, the author fully employs the dialectical method of connection and development to argue, from both theoretical and empirical perspectives, the possibility of the central bank coordinating multiple objectives. It proposes that the government does not need to legally fix the order of monetary policy objectives but should adjust the focus of objectives based on the principle of discretionary policy in response to changes in economic and financial conditions. Third, it organically combines monetary policy objectives and their effectiveness, providing a dialectical analysis of the rationality of Western monetary policy effectiveness theories and their applicability in China. It offers new insights into the measurement standards of monetary policy effectiveness and the distributive effects of China's monetary policy. Additionally, it proposes corresponding policy recommendations to address factors that constrain the effectiveness of multi-objective policies, thereby expanding the space for theoretical reflection and further strengthening the author's multi-objective arguments.