The Effectiveness Evaluation of Unconventional Monetary Policy under the Framework of New-Keynesian Economics
|School||Southwestern University of Finance and Economics|
|Keywords||unconventional monetary policy the critical point for entrance New Keynesian economics SVAR model|
Since the outbreak of the financial crisis in2008,"unconventional" monetary policy research that developed from2001to2006has been into another starting point of the research. In general, the academic research at home and abroad for unconventional monetary policy started lately. Foreign scholars studies begin with Japan’s domestic quantitative easing monetary policy from2001to2006.In2008, the research for it has deepened-focus on the definition of unconventional monetary policy, its entrance and existence, and the unconventional monetary policy implementation effectiveness, ect. This is a substantive step. By contrast, the domestic study of unconventional monetary policy is relatively backward. It concentrates on the following aspects:a、Introduce unconventional monetary policy, combing related literature, carrying on the literature review; b、Find the differences between developed and developing countries, such as the United States and China; c、Analysis the unconventional monetary policy of the United States and other developed countries adopted, offering the reference for the formulation of monetary policy in our country. It is thus clear that the domestic academic research on unconventional monetary policies has yet to be further strengthened.During the2008, The Federal Reserve,The People’s Bank of China and other economies both begin to innovate a variety of unconventional monetary policy tools. Finally they achieved the goal of price stability and repaired the financial market liquidity.The second part of this article focuses on combing the domestic and foreign studies of unconventional monetary policy. In carding process, the author found that domestic and foreign studies are lack of the identical views about the critical point(strategy)of the unconventional monetary policy. At the same time, the research on unconventional monetary policies which taken by China’s central bank are only declarative description or comparison According to the above two points, this article strives to resolve the following three problems:a、Is there a connotation of the expandability unconventional monetary policy. With the comprehensive analysis, this paper gives the unconventional monetary policy the following definitions:It is the other side of monetary policy, it is implemented after the failure of the conventional monetary policy action(i.e., zero boundary)or when the transmission channel is still available, firstly it is the innovation on the conventional monetary policy tools, secondly it’s the creation of monetary policy, such as expanding the scope of the counterparty, currency swaps, foreign currency loosen, etc. In a word, so it is combination of unconventional use of monetary policy and the innovative of monetary policy. b、 the second question is that is there only one entry strategy (zero boundary) for unconventional monetary policy. Despite the time constraints, this paper takes the perspective of the traditional interest rate transmission mechanism and channels to view accessibility of unconventional monetary policy; it has proved that there is another entry way, which is the combination of conventional and unconventional monetary policy. c、What effect do the different entry strategy of unconventional monetary policy have on the macro economy. Combined with IS-LM model and sticky price model, this paper explains this problem from the view of new Keynesian theory. And by building SVAR models represented by America and China, this paper evaluate the effects of unconventional monetary policy on macroeconomic from the perspective of empirical. No matter which perspective, they conduct the conclusion:two different strategies of unconventional monetary policy have the same impact on macro-economy, namely, in the short term they can stabilize prices, prevent industrial economy from falling, repair the liquidity of financial markets, promote economic recovery; but for long term there is a possibility of inflation.Through thinking the above three problems, this paper draws the following conclusions:First, the unconventional monetary policy’s final goal, intermediary indicator and operation target, etc are different from the conventional monetary policies;Second, from the analysis of unconventional monetary policy practice of all countries, the entry strategy of unconventional monetary policy has two tapes:zero boundary and conventional&unconventional monetary policy use in parallel. Third, in addition to the help of interest rate transmission mechanism, unconventional monetary policy has more transmission mechanisms than conventional monetary policy.Fourth, the theory and empirical model both suggest that unconventional monetary policy have a positive impact on macro-economy in the short term.Fifth, the two type of unconventional monetary policy have different effect on macro-economics.In the final of this paper, the author puts forward the following policy recommendations for reference:First, pay attention to the management of the public expectations. We can draw lessons from successful practices in the United States--by official statements, speeches, and commitment to communicate with the public.Second, we can make use of the change of the balance sheet structure, and the expansion of the scale of their balance sheets to explore the use of central bank’s balance sheet.Third, pay attention to strengthen the short-term effect(price stability, economic growth), and prevent the long-term effect (inflation)from happening.Fourth, foreign exchange policy adjustment and related foreign exchange liquidity operations can be use in the future.Overall, this article has certain innovation from the research Angle, research methods, the article idea level, etc.From a research perspective, this paper has a novel research perspective; it takes the analysis of different entry strategy of unconventional monetary policy as the breakthrough point.This angle is unique in the domestic and abroad researches.And for the research methods, this paper uses empirical analysis method, theoretical explanation and empirical research method. By name of the unconventional monetary polices practices of the world’s major economies, the author concludes the two kind of entry strategy from the perspective of experience determines. And for the evaluation of effectiveness that the unconventional monetary policy impact on the macro-economy, the author study it in theoretical and empirical way.In addition, in order to make the whole article specific strong logicality and coherence, the paper adopts the following research method and layout structure: the first chapter is introduction, mainly point out several related problems; The second part is literature review for both domestic and abroad researches; In the third part of this article, the author gives the unconventional monetary policy a more expanding connotation, and in the third section, based on the relevant unconventional monetary policy practices of major countries in the world, the author classifies the critical point (strategy) about unconventional monetary policy; The fourth part is one of core part of this article. This part discusses the transmission mechanism and the effectiveness of unconventional monetary policy under the new Keynesian theory. The empirical part of chapter5coincides with the fourth part. This part uses empirical SVAR model to illustrate how do unconventional monetary policy of the United States, and China have impact on macroeconomic, and what effect. At the last section, the author puts forward some relevant policy suggestions.