|Table of Contents|

The optimal monetary policy rule under goals of stabilizing leverage and steady growth(PDF)

《长安大学学报（社科版）》[ISSN:1671-6248/CN:61-1391/C]

Issue:
2021年04期
Page:
116-126
Research Field:
经济学
Publishing date:
2021-09-20

Info

Title:
The optimal monetary policy rule under goals of stabilizing leverage and steady growth
Author(s):
ZHAO Miyun
(School of Economics and Management, Chang'an University, Xi'an 710064, Shaanxi, China)
Keywords:
macro leverage ratio;  steady growth;  stabilizing leverage;  monetary policy rule;  interest rate rule;  real economy;  Central Bank;  output gap;  money supply
PACS:
F832
DOI:
-
Abstract:
In order to understand the issue of how the monetary policies respond to the macro leverage ratio, this paper builds the macroeconomic constraint environment described by welfare loss function, dynamic IS-NK-Phillips curve and the natural interest rate endogenous decision-making equation to obtain the optimal interest rate and quantity rules incorporated into macro leverage ratio, and uses GMM and State-Space method to estimate the optimal monetary policy rule of fixed and time-varying parameters respectively based on the quarterly macroeconomic data from 1996 to 2020 in China. The results found that both the optimal interest rate rules and quantity rules in China have the policy orientation of focusing on macro leverage significantly, and the former is more proactive. Specifically, the optimal interest rate rule promotes growth at the same time the macro leverage ratio is relatively stable, while the optimal quantity rule irons out economic fluctuations and easily leads to a large fluctuation in the macro leverage ratio. Especially in the face of major economic shocks, the Central Bank has the preference for tolerating moderate inflation and appropriate leverage to steady growth. The Central Bank should pay attention to the macro leverage ratio, give full play to the effect of interest rate policy on promoting growth while securing the cap to the total money supply, further expand and optimize China's interest rate policy framework, extend the regulation range of nominal interest rate on inflation, the real economy and the macro leverage, transform from unsteady rule to steady rule, and enhance the mediating effects of interest rate policies on macro leverage goals, so as to promote the sustainable and high quality development of the macro economy.

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Last Update: 2021-09-20