MonetaryPolicyandItsValidityinChina.docx
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MonetaryPolicyandItsValidityinChina.docx
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MonetaryPolicyandItsValidityinChina
MonetaryPolicyandItsValidityinChina
学生姓名:
段方宇
学号:
32010021227
学院(系):
经济学院
专业(方向):
国际经济与贸易实验班
Abstract:
Afterwhatmaybedescribedasdazzlingmonetarypolicychangesfrom“tight”in2008and“moderatelyloose”during2009-2010tothecurrent“prudent”policy,PBOCisnowfocusingmoreonestablishingasystemframeworkforprudentmacrofinancialmanagement.ThismarksaneweraforChina’smonetarypolicycontrol.ReviewingcurrentmonetarypolicyandscrutinizingitsvaliditywillcarryasignificantimpactforenhancingChina’smonetaryandfinancialtheoryandpolicypractice.
ThisessayexplorestheissueofcurrentmonetarypolicyanditsvalidityinChina.ItgivesanoverviewofmonetarypolicyinChinaanddiscusses4ultimategoalsofmonetarypolicyindetails.TheessayfurtherdemonstratesmethodsofPBOCwhichareusedtoimplementpolicyandthenevaluatethevalidityofeachmethodonebyone.Withthedataofreserverequirementratiosandloananddepositratesinrecentyears,theessayillustratestheflawofcurrentmonetarypolicyandgivereasonsforthatunderdetailedanalysis.
KeyWords:
Monetarypolicy,objectives,open-marketoperations,reserverequirements,market-basedinterestrate
1.OverviewofMonetaryPolicyinChina
Amonetarypolicysystemincludestheultimateobjective,intermediaryobjective,andoperationinstruments,andsoforth.Itisaprocessbywhichthemonetaryauthorityofacountrycontrolsthesupplyofmoney,oftentargetingarateofinterestforthepurposeofpromotingeconomicgrowthandstability.
Therearetwokindsofmonetarypolices.Narrowmonetarypolicymeansthatthecentralbankusesdifferenttoolstomanageinterestrateandmoneysupplysoastoachievesomespecificgoalssuchaslowemploymentandeconomicgrowth.Generalizedmonetarypolicymeansallgovernment,centralbankandotherrelateddepartments’activitiestowardcurrency.
Afterwhatmaybedescribedasdazzlingmonetarypolicychangesfrom“tight”in2008and“moderatelyloose”during2009-2010tothecurrent“prudent”policy,PBOCisnowfocusingmoreonestablishingasystemframeworkforprudentmacrofinancialmanagement.ThismarksaneweraforChina’smonetarypolicycontrol.ReviewingcurrentmonetarypolicyandscrutinizingitsvaliditywillcarryasignificantimpactforenhancingChina’smonetaryandfinancialtheoryandpolicypractice.
2.ObjectivesofMonetaryPolicy
Therearefourfinalgoalsofimplementingmonetarypolicywhicharestabilizingprices,achievingfullemployment,promotingeconomicgrowthandbalanceinternationalpayment.
2.1Stabilizingprices
Stabilizingpricesistheprimaryaimofcentralbank’smonetarypolicyandtheessenceofstabilityofpriceliesinthestabilityofvalueinthecurrency.Historically,howmuchgoldthatthecurrencycontainsdeterminesthevalueofthatcurrency.However,itisnolongerusedtomeasurecurrencyvalueunderthemoderncreditcurrencycirculation.Nowadays,itispurchasingpowerwhichishowmuchproductscanbetradedwithperunitofcurrencythatdeterminesthecurrencyvalue.Thepurchasingpowerisoftenintermsofpriceindexforabasketofproductsorsyntheticpriceindex.Atpresent,governmentsandeconomistsusuallyadoptsyntheticpriceindextomeasurepricestabilityindifferentcountries.Therisingofpriceindexandthedecreasingofpriceindexbothindicatestheunstablepricesinacountry.Forexample,therisingofconsumerpriceindexmeanstheinflation.Thus,inordertostabilizeprices,governmentshouldcontroltheinflationanddiminishdrasticpricefluctuationinacertainperiod.
2.2Fullemployment
Fullemploymentmeanskeepingemployedpeopletoastableandrelativehigherlevel.Underthiscircumstances,allpeoplewhowanttoandhavetheabilitytoworkcangetajobeasilyinareasonablecondition.Fullemploymentconcentratesonthedegreewhichavailableresourcesareutilized.Itisverydifficulttomeasuretheutilizationofeconomicresources.Thus,weoftenuseunemploymentratetoindicateemploymentleveloflaborforce.Unemploymentrateistheratioofunemployedlaborforceandaggregatelaborforce.Theunemploymentraterepresentsemploymentlevelinsociety.Theoretically,unemploymentrateequalstoresourcesthathavebeenwasted.Thus,higherunemploymentratemayimposeanadverseeffectoneconomicgrowth.Hence,eachcountrytriestheirbesttocontrolunemploymentratetothelimitsoastoachievetheaimofpromotingeconomicgrowth.
2.3EconomicGrowth
Thisobjectiverequiresareasonableandswifterspeedofeconomicgrowth.Currently,eachcountryusesthegrowthrateofrealpercapitaoutputtomeasureeconomicgrowth.
Thegrowthrateofrealpercapitaoutput=Thegrowthrateofnominalpercapitaoutput-Inflation
GovernmentusuallyestablishestargetsforrealGNPandcentralbankwillconsiderthistargetasoneoftheobjectivesofmonetarypolicy.
2.4BalanceofInternationalPayment
ItisnecessarytoadoptvariousmeasurementstobalanceBOPsoastoachievethisgoal.Thereasonisthatbothsurplusanddeficitmayimposeaharmfulimpactondomesticeconomyinalongrun.Ontheonehand,longlastingdeficitwilldecreaseforeignexchangereserveandcastburdenofdebitonthewholesociety.Ontheotherhand,longlastingsurpluswillcreatemorewasteinusingdomesticresourcesandleavepartofforeignexchangereserveunused.Especially,whenonecountryincreasesitsmoneysupplysoastobuyforeignexchange,inflationmayoccur.Apparently,theadverseeffectoflonglastingdeficitisgreaterandallcountriesindulgeindiminishingdeficit.
3.InstrumentofPBOC—CurrentMeasures
Monetarytheoryprovidesinsightintohowtocraftoptimalmonetarypolicy.Itisreferredtoaseitherbeingexpansionaryorcontractionary,whereanexpansionarypolicyincreasesthetotalsupplyofmoneyintheeconomymorerapidlythanusual,andcontractionarypolicyexpandsthemoneysupplymoreslowlythanusualorevenshrinksit.Expansionarypolicyistraditionallyusedtotrytocombatunemploymentinarecessionbyloweringinterestratesinthehopethateasycreditwillenticebusinessesintoexpanding.Contractionarypolicyisintendedtoslowinflationinhopesofavoidingtheresultingdistortionsanddeteriorationofassetvalues.TherearethreegeneraltoolsthatPBOCuseswhichare:
open-marketoperations,reserverequirements,andamarket-basedinterestratesystem.
Inthethirdquarterof2011,withtheorderoftheStateCouncilofChina,PBOCcarriedonprudentmonetarypolicysoastoachievethemaingoalofmacro-control:
Stablepricelevel.PBOCmainlyfocusesonheightenthepertinence,flexibilityandvalidityofmonetarypolicybystrengtheningbanksystem’sliquiditymanagement,promotingthesteadygrowthofmonetarycredit,keepingfinancingfromallsourcesatanappropriatelevel,andfacilitatingthesmoothdevelopmentoftheeconomyandfinance.
3.1FlexibleOpenMarketOperations(OMOs)
Openmarketoperations(OMOs)areameansofimplementingmonetarypolicybywhichacentralbankcontrolsthenationalmoneysupplybybuyingandsellinggovernmentsecuritiesontheopenmarket.Generallyspeaking,thePBOCwithdrawsmonetarybasebyissuingcentralbankbillsandinjectsmonetarybasebyredeemingthem.
3.1.1ImplementingOMOsataModerateDegreeandanAppropriateTime
PBOCstrengthensanalysisandscrutinyofdifferentfactorsthatwillaffectsupplyanddemandofliquidity.Thismeasurewillcopewithothermonetaryinstrumentsandregulatebanksystem’sliquiditytoanappropriatelevel.
3.1.2OptimizingtheCombinationofOMOsTools
PBOCisactivelygrapplingwithshort-termliquiditywavescausedbyseasonalfactorsandchangesofmarketenvironment.PBOCtacklesthisproblembycombingcentralbankbillsandshort-termrepurchase.ThiswillcontributetooptimizingOMOstoolsandfurtherenhancingpertinenceandflexibilityofhedgingschemes.
3.1.3AppropriateControlofInterestRate
Combiningwithliquiditymanagementandthebenchmarkinterestrateadjustment,PBOCwillappropriatelycontroltheinterestrateinOMOsandleadtoaefficientmarketexpectation.
3.2ConsummatingtheReserveRequirementSystem
InMarch1998,thePBOCbegantoreformthereserverequirementsystembymergingtheaccountsforrequiredreservesandexcessreservesandadoptingauniforminterestrate.InDecember2003,thePBOCreformedtheinterestratesystemfordepositreservesbydifferentiatingtheratesofinterestonrequiredreservesandexcessreserves.Theinterestratefortheexcessreservesoffinancialinstitutionswasloweredfrom1.89percentto1.62percent,whiletheinterestratesoftherequiredreservesremainedunchangedat1.89percent.OnApril25,2004,thePBOCadoptedadifferentiatedrequiredreserveratiosystem.ThePBOCadjustedtherequiredreserveratioupwardtwentytimesfrom6percentinNovember1999to17.5percentinJune2008andthendecreasedtheratiofourtimesto14.5percentinDecember2008.
SinceSeptember2011,PBOCwillguaranteetoincludemargindeposittothewholesystemandimplementthismethodin3to6monthsundertheliquiditysituationinallfinancialinstitutions.Thisisaperfectiontothedepositbaseandthewholesystem.Continuingdifferentiateddynamicadjustmentofdepositreserveandchangingrelatedparametersinaccordwithcurrentaffairswillsynthesizecreditgrowthandcountercyclicalcapitalrequirementsoastooptimizethecreditstructure.
3.3Market-BasedInterestRateSystem--IncreasingLoanandDepositRatesAppropriately
Since1993,thePBOChastakenmanyimportantstepstowardtheliberalizationofmark
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