Exchange-rate Regime Flexibility, Effectiveness and Independence of China's Monetary Policy ——An Empirical Analysis Based on SFAVAR Model

Abstract

Abstract:

This paper selects 126 macroeconomic indexes at home and abroad during 1998-2011 to build a SFAVAR model. Form the aspects of external shocks and internal mechanism, the effectiveness and independence of China's monetary policy in different exchange-rate regime before and after exchange rate reform is discussed based on the structure of international economic factor. The results show that: (1) The effectiveness of monetary police improved obviously after the reform of exchange rate regime; (2) Because of interest rate deregulation and the realization of its linkage mechanisms with exchange rate, the effectiveness of price-based monetary policy improved more significantly than that of the quant-based policy; (3) After the reform of exchange rate regime, both the objectives and policy tools of monetary policy received more effects from external shocks in current and long-term, so floating range deregulation of RMB exchange rate didn't enhance China's monetary policy independence.

Key words: exchange-rate regime flexibility, monetary policy, SFAVAR model

Yang Liu, Huang Ting. Exchange-rate Regime Flexibility, Effectiveness and Independence of China's Monetary Policy ——An Empirical Analysis Based on SFAVAR Model[J]. , 2015, 27(7): 43-57.

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