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Effective Implemental Procedure of Monetary Policy to Fight Inflation
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TitleEffective Implemental Procedure of Monetary Policy to Fight Inflation  
AuthorWang Xi,Zou Wenli and Ye Mao  
Key WordsInflation; Monetary Policy; Operating Procedure; Effectiveness 
AbstractThe paper first summarizes China’s special monetary policy instrument and target system in accordance with the financial regime of China. Then following the train of thought of retrograde analysis on monetary policy implementation, and applying Granger causality test, forecast error variance decomposition and impulse response analysis based on VAR model, we compare the effects of various monetary policy instruments, operational and intermediate targets to identify the best monetary policies and the operating procedure to fight inflation. Our analysis concludes that: M1 is the best intermediate target to curb inflation, credit plan is the most effective operational target in affecting M1, and market interest rates has some influence to both inflation and M1. Thus, the effective implemental procedure of monetary policy to fight inflation is: the Central Bank uses credit policy together with other policy instruments as supplement, to control M1, and then to finally attain the goal of fighting inflation. The paper also provides economic explanations to the above conclusions mainly based on the credit-scale-control system. 
Serial NumberWP105 
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