What Is Restrictive Monetary Policy?

Monetary policy, also known as financial policy, refers to the general term for the various policies, policies, and measures used by the central bank to control and regulate the supply of money and credit in order to achieve its specific economic goals. The essence of monetary policy is that the country's supply of money adopts different policy trends such as "tight", "loose" or "moderate" according to economic development in different periods. ^[1]

Monetary Policy

(Economic and Financial Policy)

Monetary policy, also known as financial policy, refers to the general term for the various policies, policies, and measures used by the central bank to control and regulate the supply of money and credit in order to achieve its specific economic goals. The essence of monetary policy is that the country's supply of money adopts different policy trends such as "tight", "loose" or "moderate" according to economic development in different periods. ^[1]

Monetary Policy,

The nature of monetary policy (the central bank controls the money supply, as well as currency, output and

Narrow content

Means

The goal of monetary policy is not an isolated goal, but an interconnected organic whole consisting of three progressive levels: operational goals, intermediary goals, and final goals.

Monetary policy tools are controlled by the central bank, and are used to regulate the base currency, bank reserves, money supply, interest rates, exchange rates, and credit activities of financial institutions to achieve their various economic and administrative means. There are seven main measures:

First, control

First of all, it is difficult for new foreign exchange accounts to support the rapid expansion of the base currency.

The sharp decline in new foreign exchange accounts in 2012 is an important reason for the tightness of domestic capital. Looking forward to 2013, benefiting from loose monetary policy overseas, China's capital flow is likely to improve. However, due to the mismatch of foreign currency assets and liabilities in the private sector, the medium and long-term private sector will still increase foreign currency assets. Therefore, the increase in new foreign exchange accounts in 2013 will be improved to some extent, but it will be difficult to support the high growth of the base currency.

Second, the central bank's willingness to relax the currency is not strong, and it is difficult to significantly increase the currency multiplier. In the "Q3 Monetary Policy Implementation Report", the central bank believed that "the Chinese economy is still in the structural adjustment stage as a whole, and this process will further unlock the potential for growth." In other words, monetary policy may take structural adjustment as an important goal, instead of seeking a counter-cycle to promote a short-term rapid economic rebound, but it does not rule out adjusting the deposit rate to hedge changes in foreign exchange accounts.

It takes a period of time from the formulation of monetary policy to obtain the main or all effects. This period of time is called the time lag.

The time lag consists of two parts: internal time lag and external time lag.

Internal time lag refers to the period from policy making to action by the monetary authorities. It can be divided into two phases:

(1) The time distance from when the changing situation requires action by the monetary authority to when it recognizes this need is called

Introduction

At the beginning of August 2011, the mid-year work conferences of financial regulatory authorities were held one after another. The message from the meeting shows that the overall monetary policy in the future is difficult to relax. With inflation likely to peak, monetary policy or appropriate fine-tuning in the second half of the year will adopt a " directional easing " approach, appropriately relax restrictions on financing conditions, and give preferential financing policies to areas such as agriculture, farmers, small and medium-sized enterprises, and affordable housing.

According to the latest data released by the central bank on the 14th, RMB loans increased by 470 billion yuan in September.

First, the effect of tightening monetary policy during inflation may be significant, but the effect of expanding monetary policy during economic recession is not obvious.

Second, from the perspective of the equilibrium of the money market, if the increase or decrease of the money supply affects interest rates, the premise of constant currency circulation must be assumed.

Third, the external time lag of monetary policy will also affect the effectiveness of the policy.

Fourth, in an open economy, the effect of monetary policy is also affected by the flow of funds internationally. For example, when a country implements a tight monetary policy, interest rates rise and foreign funds will flow in. If interest rates fluctuate, the domestic currency will appreciate. Exports will be suppressed and imports will be stimulated, which will cause the country's total demand to fall even more than in a closed economy.

The problems of monetary policy in practice are far more than these, but only from these aspects, the role of monetary policy as a means to calm economic fluctuations is also limited. ^[3]

Monetary policy wait-and-see, it is expected that the subsequent increase in fiscal policy will be vigorous

Song Qinghui, a well-known economist, told a reporter from China Times that the loosening of monetary policy brought about the accumulation of inter-bank liquidity, and asset price bubbles in the stock market and the property market have also risen. Regulators are reflecting on relevant monetary policies, and fiscal policy can be further explored In the next step, management may make a moderate adjustment in fiscal policy direction and intensity.