Research on the optimal monetary policy response mechanism in China during the transition period

Research on the optimal monetary policy response mechanism in China during the transition period


Author:Meng Xianchun, Zhang Yishan, Li Tianyu Journal: Date:

Accurately identifying the policy preferences of the central bank is of great significance to improving the monetary policy regulation system and adapting to the complex and changeable economic environment under the "new normal". Under the secondary segmented loss function of the central bank and the new Keynesian macroeconomic framework, the paper derives the optimal nonlinear quantitative monetary policy rules in China during the transition period, and explores the policy response characteristics of the central bank on this basis, and the estimated results find: First, China's central bank has obvious asymmetric preference for "promoting growth" and avoiding economic contraction, when the economic growth gap deviates positively, the monetary authority as a whole still increases the money supply to stimulate further economic growth, and when the growth gap deviates negatively, The intensity of policy attention to economic growth has increased significantly to avoid economic contraction; Second, the central bank's relatively inadequate response to inflation targets limits the function of monetary policy to stabilize prices; Third, China has the characteristics of both transition economies and emerging market economies, so China's central bank prefers economic growth targets, but with changes in the macro-financial environment, the optimal monetary policy rules will also be adjusted.

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