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

Author: Chen Tao
Publisher:
Publish Date: 2006-09-01
Features: Regarding how the ultimate goal of monetary policy should be chosen during China's transition period, the theoretical community has been engaged in debates over single-objective, dual-objective, and multi-objective approaches. After the passage of the "People's Bank of China Law" in 1995, the majority of scholars have accepted the view that price stability should be fixed as a primary or sole goal among single or dual objectives. However, the debate over monetary policy objectives has not ended there. From the perspective of China's monetary policy operations, the central bank has always been constrained by multiple objectives from the government and has had to pursue and balance them. How can the discrepancy between the theoretical and practical levels of monetary policy objectives be explained? Is it the result of behavioral distortions between the government and the 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 a relatively thorough and innovative analysis of the necessity, coordination, and effectiveness of multi-objectives. Compared to previous multi-objective theories, this book has the following characteristics: First, its analysis of China's conditions during the transition period is highly practical, effectively integrating monetary policy theory with China's practices. Second, in response to the criticism of multi-objective coordination from the single-objective theory, the author fully employs the dialectical methodology of interconnection and development to argue, from both theoretical and empirical perspectives, the possibility of the central bank coordinating multiple objectives. The author contends that the government does not need to legally fix the order of monetary policy objectives but should adjust the focus according to the principle of discretion, responding to changes in economic and financial conditions. Third, it organically combines monetary policy objectives with their effectiveness, offering a dialectical analysis of the rationality of Western monetary policy effectiveness theories and their applicability in China. It proposes new insights on the measurement standards of monetary policy effectiveness and the distributive effects of China's monetary policy. Additionally, it offers policy recommendations to address factors that constrain the effectiveness of multi-objective policies, thereby expanding the scope of theoretical reflection and further strengthening the author's multi-objective argument.