07. A Conjecture of Chinese Monetary Policy Rule

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1、ANNALSOFECONOMICSANDFINANCE10-1,111–153(2009)AConjectureofChineseMonetaryPolicyRule:EvidencefromSurveyData,MarkovRegimeSwitchingandDriftingCoefficients*YanbinChenSchoolofEconomics,RenminUniversityofChinaBeijing,100872,ChinaE-mail:cyb@ruc.edu.cnandZhenHuoSchoolofEconomics,RenminUniversityof

2、ChinaBeijing,100872,ChinaE-mail:huozhen@ruc.edu.cnThispaperstudiesamodifiedChineseTaylor’srulewithmoneysupplygrowthrateastheintermediatetarget.Wedevelopsurveydatatomeasuretheexpectedinflationandusetherealmarginalcostasaproxyfortheoutputgap.TheMarkovregimeswitchingmodel,theTVPmodelandthespl

3、itsam-pleOLSestimationareemployedtoestimatethechangingcoefficientsofthemonetaryreactionfunction.WefindthatthereweretwostructuralchangesintheChinesemonetarypolicyrule,whichtaketheformofdiscretejumpsratherthancontinuousadjustments.Besides,theChinesecentralbankisnotpurelyforward-lookingasmostl

4、iteratureassumed.KeyWords:Taylor’srule;Surveydata;Realmarginalcost;TVPmodel;Markovregimeswitchingmodel.JELClassificationNumbers:E52,C32,C50.*WegratefullyacknowledgethefinancialsupportfromtheNationalScienceFoun-dation(Project70841022).ThisworkisalsopartoftheRenminUniversityofChina985Project

5、“EconomicGrowth,IncomeDistributionandPublicPolicyResearch”,andthejointprojectheldbytheFinancialSurveyandStatisticsDepartmentofthePeople’sBankofChinaandtheAordoCenter.1111529-7373/2009Allrightsofreproductioninanyformreserved.112YANBINCHENANDZHENHUO1.INTRODUCTIONSinceTaylorproposedthesimpl

6、ediscretionarymonetarypolicyrulein1993,ithasinfluencedthemacroeconomicresearchgreatly1.AccordingtotheoriginalTaylor’srule,thestabilizationmonetarypolicyshouldbeconductedinthewaythattheresponsetotheinflationgapislargerthan1(1.5,typically)andtheresponsetotheoutputgapisbetween0and1(0.5,typica

7、lly).ThedebatesovertheTaylor’sruleneverstopandtheextensionofpolicyformemergesquiteoften.Inrecentyears,theforward-lookingTaylor’srulehasbeenpopularinempiricalresearch.Inthislineofliterature,threeissuesstandout:(1)themeasurementofoutputgap.Traditionally,ithasbeennecessaryto