The Macroeconomic Effects of Monetary Policy Expectations Management:Annotation of the Role of Liquidity Regulation
China is facing a variety of shocks,such as geopolitical conflicts and trade unilateralism led by the United States,and the uncertainty in the economy is gradually rising and the expectations of economic agents are weakening.Given the subjective nature of economic expectations,gradually rising uncertainty,especially economic policy uncertainty,is likely to lead economic agents to form distorted and confusing expectations of the economy,which will reduce the effectiveness of macroeconomic policies.On the one hand,monetary policy is an important part of the steady growth relay of China's macroeconomic policy at present,and its regulatory effect is vulnerable to the uncertainty and the pressure of weakening expectations.And on the other,in the process of monetary policy transmission to the real economy,commercial banks play a key role in liquidity rationing,so liquidity regulation will undoubtedly have a non-negligible impact on monetary policy.This paper not only introduces multiple frictions in the product and labor markets in the NK-DSGE model,but also focuses on portraying the behavior of financial intermediaries,based on which it introduces liquidity regulation shocks to commercial banks,and examines the impact of liquidity regulation on the effects of monetary policy as well as macroeconomic fluctuations.In addition,little empirical evidence has been provided in the literature on expected monetary policy shocks through theoretical modelling,this paper uses the text of the People's Bank of China's Monetary Execution Report to construct a central bank communication index,while using commercial bank data to construct a liquidity regulation index,and empirically studies the impact of central bank communication,a form of expectation management,and liquidity regulation on the macroeconomy through the SVAR model,as well as analyzing the central bank's monetary policy response to expectation management and liquidity regulation.It is found that:Firstly,recording to the estimated results based on SVAR model,monetary policy anticipation shocks can stimulate output growth and investment growth and trigger an accommodative monetary policy response from the central bank,whereas liquidity regulation has the effect of promoting investment and output growth but fettering liquidity expansion in the commercial banking system.As regard to the numerical simulation of DSGE model,secondly,guiding economic agents to form expectations of monetary policy,which is conducive to the full realization of the regulatory function of monetary policy,and thirdly,liquidity regulation reduces the risk of commercial banks,is conducive to maintaining the health of the financial system,and has the effect of stimulating aggregate demand and stabilizing economic growth,but as liquidity regulation imposes constraints on the liquidity of the banking system,it will weaken the effect of monetary policy to a certain extent.The findings of this paper have implications for strengthening monetary policy expectation management and promoting synergy between monetary policy and liquidity regulation.
monetary policyeconomic expectationscentral bank communicationliquidity regulation
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