Is Inflation Targeting Suitable for Chinese Monetary Policy at This Stage? Based on the analysis Framework of Flexible Target Rules

This paper analyzed the advantages of inflation targeting in reducing inflation rate and stabilizing the economy from these aspects involving in the central bank independence,monetary tools and transmission mechanisms,market-oriented interest rate and inflation targets,etc.The empirical study based on Chinese data demonstrates that the conditions for implementing inflation targeting are not suitable for our country,so the inflation targeting is not the optimal rule for China.Therefore,our government should hold money supply and price constant as the mixed target for controlling economy in the short run.However,with the development of economy,the conditions for implementing inflation targeting will be improved;this rule can be applied in the long run.Now we can consider it as a shade policy to stimulate the development of economy before the conditions are satisfied.