Monetary Policy Expectation and Inflation Management:A DSGE Analysis based on News Shocks
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| Title | Monetary Policy Expectation and Inflation Management:A DSGE Analysis based on News Shocks
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| Author | Wang Xi, Wang Xi and Chen Zhongfei |
| Organization | (Lingnan College and Economic Research Institute, Sun Yat-sen University |
| Email | lnswx@mail.sysu.edu.cn；wancesr88@126.com |
| Key Words | Monetary Policy Expectations; Inflation Management; News Shocks; DSGE |
| Abstract | From the perspective of news shocks, this paper distinguishes and studies the effects of both the anticipated and unanticipated monetary policy shocks on China’s inflation in a New Keyesian DSGE model. Furthermore, we analyze the characteristics and mechanism of China’s monetary policy by Sino-US policy effect comparison, and the replacement of parameters and expectation structure. The conclusions are as follows: (1) The impacts of the anticipated shocks are much stronger than the unanticipated ones in China. (2) Compared with the case of the United State, China’s monetary policy has a larger and less persistent effect together with a minor over-shooting feature. (3)The above characteristics origin from the incoherency of the monetary policy conducted by the central bank and the short-sighted expectation from the economic agents. The policy implications are derived: (1) To make monetary policy more effective, the central bank should guide the public’s expectations by means of central bank communications, etc. (2)The central bank should try to avoid discretion in order to maintain the consistency of monetary policy. (3) The implementation of monetary policy should keep its deeds with its words. In sum, China’s monetary policy should be more transparent, coherent and credible. |
| Serial Number | WP946 |
| Time | 2015-11-03 |
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