The suitability of the money supply as the intermediate target of China's current monetary policy
|Keywords||intermediary target money supply demand of money basic money monetary multiplier|
There is very important function in the system of adjusting and control of the monetary policy in the intermediary targets. Intermediate targets are connection between the monetary instruments and the final goal of the monetary policy. Through the monetary authorities can learn the effect of the monetary policy and then adjust the strength and the direction of the policy. For this reason, the choice of intermediate targets seems very important after the monetary authorities have confirmed the final goal.The Central Bank (CB) of our country, according to the final goal of "keep the value of money steady, and promote the economic growth in proper order" in 1996, choose money supply as the intermediate target. With the development and change of the financial environment, have some scholars point out money supply unsuitable to continue as intermediary goal already from 2001, and the other scholars thinks that the money supply may continue as the intermediate target. In this paper, to the question whether money supply can continue as the intermediate target, according the choice standard of the intermediate targets, through the positive research that the demand and supply of money of our country in recent years, draw the conclusion that money supply is unsuitable to continue as intermediate target of our country. But the analysis on interest rate, exchange rate and inflation rate indicates that they can not replace money supply as the intermediate target in the following several years. Finally, according to this kind of situation, gives CB some proposals in respect of the operation of monetary policy.The full paper divides into four chapters. Chapter 1 introduces the concept, functions and choice standard of the intermediate targets at first, then gives a retrospective description about the establishment and experience of monetary targeting in China. Chapter 2 takes the positive research of the demand of money from 1995 to 2002. The result of research indicates that the structure of the demand of money has already changed, and the stability of it became weak. Chapter 3 studies carefully the supply of money of our country from 1995 to 2002, going on from four respects: first, the mechanism of the supply of money of our country; second, the influence factors and controllability of the basic money; third, the influence factors and predictability of the monetary multiplier; fourth, the endogenity of the supply of money. In China, the result of research indicates that the deriving mechanism of the supply of money has been established, that the controllability of the basic money is becoming weak, that it is difficult to predicate the monetary multiplier accurately, and that the supply of money is endogenous. In Chapter 4, firstly judges according to the result of the Chapter 2 and 3 that the money supply is unsuitable as intermediate target in theory in future; then analyses the reasons that interest rate exchange rate and inflation rate can not replace money supply as the intermediate target; finally, gives CB some proposals in respect of the operation of monetary policy.