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Admixed Quantity Rule and InterestRule in China’s Monetary Transition
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TitleAdmixed Quantity Rule and InterestRule in China’s Monetary Transition  
AuthorLi Hongjin and Su Naifang  
OrganizationThe People's Bank Of China; 
Key WordsQuantity Rule;Taylor Rule;Monetary Policy Rule, Price-based Monetary Policy 
AbstractIn this article, we analyze the quantity and price mixed monetary policy rule in China based on monetary quantity equation and money in utility model. We further inferred that due to the quantity and price-mixed monetary rule, as the interest rate is lower than the equivalent level, the greatly growth of money supply does not increase the inflation rate significantly. In addition, if money supply grow lower than the potential level, the adjustment of interest rate should be greater than Taylor rule. The empirical analysis verified our findings and inference. There are significant liquidity effect and effective transmission channel of interest rate in China.The accelerating pace of interest liberalization has signified the importance and urgency of the central bank to turn to price-based monetary policy, and the monetary transformation condition is being more and more satisfied.  
Serial NumberWP1314 
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