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Will Economic Uncertainty Weaken the Effectiveness of Monetary Policy?
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TitleWill Economic Uncertainty Weaken the Effectiveness of Monetary Policy?  
AuthorSu Zhi,Liu Chengcheng and Wei Xueli  
OrganizationSchool of Statistics and Mathematics,Central University of Finance and Economics;; 
Key WordsEconomic Uncertainty;Economic Output;Price Level;Financial Crisis 
AbstractIn recent years,economic uncertainty increases the difficulties of the central bank’s policy operation and implementation,and it makes the industrial structural upgrade as well as other economic reform tasks which need funds to support face more challenges,it has become an important research direction to accurately grasp the relationship between economic uncertainty and the effectiveness of monetary policy. This paper clarifies the specific path between the two aspects theoretically,regards China’s stock market volatility and the EPU index as measures of economic uncertainty,constructs the economic output factor and the price level factor to measure the policy’s regulation effects,inspects systematically the effectiveness of monetary policy in three cases with high、medium and low degree of uncertainty,and compares the differences before and after the financial crisis. The results show:economic uncertainty will only affect the monetary policy tools’ regulation and control effect quantitatively,and will not change its role in the direction;there is a reverse change between the two,that is,economic uncertainty will weaken the policy’s effectiveness;the weakening degree mentioned above has become more evident after the financial crisis. This paper’s policy implications are:the central bank should regulate the direction,rhythm and intensity of the policy timely and moderately based on the economic changes to achieve the policy’s dynamic adjustment and optimization,meanwhile,strengthen the coordination and cooperation mechanism between the policies,so as to avoid the policy passivity under serious economic fluctuations,and enhance the accuracy as well as the effectiveness of decision making. 
Serial NumberWP1258 
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