The Selection of the Formation Mechanism of Expectation, the Mix of Macro-policy and the Management of Inflation Expectation

Ma Wentao

doi:doi:10.16538/j.cnki.jfe.2017.04.001

Abstract

Based on the reality of macro-policy in China, this paper analyzes the effect of the formation mechanism of expectation on the mix of macro-policy and the management of inflation expectation. The results show that dynamic stochastic general equilibrium model based on learning expectation not only portrays the trend consistency and persistent deviation between expected inflation and real inflation, but also demonstrates the changes in the price expectation index published by the people's Bank of China and the index of consumer expectations announced by the National Bureau of Statistic. From a perspective of the management of inflation expectation, the mix of monetary policy and fiscal policy is affected not only by economic fundamental factors, but also by the formation mechanism of expectation, and should shift from traditional loose-tight mode to two-tight or two-loose modes. Under the current situation, macro policy should focus on directional control based on precision guidance, strengthen the reform of economic system, and improve the supply side of economic system to match the demand side and lock the policy target. Meanwhile, by active communication, our government should shape and stabilize the macro-policy expectation of the public, and enlarge the policy adjustment space to achieve steady economic growth.