The monetary policy rules that do not take the financial stability target into account ignore the potential risk accumulation in the excesses financial prosperity under stable prices. On the basis of the two monetary policy target variables that are inflation and output respectively, it introduces financial stability in exponential form into the monetary policy targets and studies the characteristics of Taylor rule that includes financial stability target.The following empirical results have been found:firstly, financial stability and output can communicate smoothly in the monetary policy while inflation has no smooth transmission in the monetary policy; secondly, in the economic environment with high inflation, financial stability has a significant influence on interest rates, and the central bank has more focus on financial stability target; and at this state, the expansion of the output gap has greater effect on interest rates compared with the low inflation; furthermore, interest rates need to be more responsive to the deflation; thirdly, if monetary policy rule that does not include financial stability target is regarded as the reference rule of macroeconomic regulation, the effects of monetary policy regulation is underestimated; fourthly, in monetary policy regulation, China significantly focuses on financial stability target, and China's macro-control gradually tends to be adjusted in accordance with Taylor rule containing financial stability, so the research content and conclusions concerning the introduction of financial stability target into the monetary policy rules are effective.
Research on Chinese Monetary Policy Rules under the Target of Financial Stability
Journal of Finance and Economics Vol. 43, Issue 10, pp. 18 - 30 (2017) DOI:10.16538/j.cnki.jfe.2017.10.002
Cite this article
Xu Guoxiang, Guo Jianna. Research on Chinese Monetary Policy Rules under the Target of Financial Stability[J]. Journal of Finance and Economics, 2017, 43(10): 18–30.
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