Research on Monetary Policy Rules during the Transformation Period

Author: Bian Zhicun
Publisher:
Publish Date: 2006-12-01
Features: This book conducts a systematic study on the "rules and discretionary" issue of monetary policy operation norms in the transition period of China, using a large number of macroeconomic theoretical models and econometric analysis methods. The author believes that if China's monetary policy operation achieves a transition from discretionary to rule-based, the volatility of China's output growth rate and inflation rate will decrease significantly. Therefore, it is a wise choice for China's central bank to quickly transition from discretionary monetary policy operation to rule-based monetary policy operation. Through empirical research on Chinese data, the author finds that the two major popular rules—Taylor Rule and inflation targeting—currently are not very suitable for China's monetary policy practice, and monetary policy operation based on traditional MCI is also unworkable in China. This book concludes that the two major popular rules are far superior to the Taylor Rule, and therefore, China's central bank should actively create conditions to implement an inflation targeting framework to ultimately achieve a transition to inflation targeting.