Empirical Analysis of Chinese Monetary Policy Rules on Forward-looking Taylor Reaction Function

This paper employs the historical analysis and the reaction function method to conduct an empirical analysis of China’s monetary policy in the framework of Taylor rule.By comparing the rule value with the actual value of the interest rate,we show that Taylor rule can provide a benchmark formeasuring the stance of China’s monetary policy.The actual value deviates from rule value when the policy operation lags behind the request of the development of economic situation.In such an unstable monetary policy regime, the generation and devleopment of inflation or deflation is of a self-fulfilling mechanism.China’s monetary policy should be trans-formed from an unstable rule to a stable one.We should actively carry interest rate reform forward and set up the monetary policy regime with the interest rate of money market as the intermediate targett.