Monetary Policy and Macroeconomic Fluctuation
|School||Central China Normal University|
|Course||History of Economic Thought|
|Keywords||Economic Fluctuation Trade Cycle Monetary policy|
Since the American subprime crisis caused the global financial crisis, the global economic has been always fluctuating. Confronting the threatening crisis, most governments chosed the monetary policy to draw the economy out of the predicament. This measure dealt with part of contradictories temporarily, and made people have hope for the economy to go out from the predicament. However, as the monetary policy has been withdrawed gradually, the problems came out, the economical fluctuation was even more frequent and fierce. Many governments’policy choice has been caught in the inaccurate resolution.As for the explanation of the financial crisis in 2008 and the subsequent economical fluctuation, the majority of scholars tend to ascribe the crisis to the American excessive financial innovation and lacking in supervise. However, it is only the representation that the crisis presents. The intrinsic cause has not been unearthed. This article mainly selects to base on the trade cycle theory of the Austrian School which has succeeded to forecast and explain all past crisis. On the basis of this theory, this article sources for the root of the economical fluctuation and explain crisis in 2008, and also considers that the root of the economical fluctuation arises from the incorrect investment that the excessive money supply has caused, which has given rise to the distortion of the productive structure and the disorder of the distribution of resources. When it is unable to put currency into circulation, so as to sustain a flourishing economy, the depression emerges. In the period of depression, it’s time for adjusting the prophase incorrect investment. In this time if the government carries on the monetary policy, it will mislead the distribution of resources and adjustment in the market furtherly, and even more cause fiercer economical fluctuation.This article considers that the trade cycle theory of the Austrian School is very predictive and interpretative for the economic crisis and the economical fluctuation. It has the early warning function for the economical fluctuation and the emergement of crisis. And using this theory, we could defend in anticipation affectively. In the process of the crisis, the government should turn dominating the economy into guiding and avoid using the monetary policy to stimulate the economy. We should reform the institutions and innovate so as to establish the market confidence. Furthermore, this article also puts forward some corresponding policy proposals in the light of the influence that our country has suffered in the financial crisis and the government policy under the current economic environment.