Summary:
During the past 40 years of reform and opening up, China's financial system has evolved from scratch and undergone tremendous changes. At present, China has basically built a modern financial system with vitality and international competitiveness that is compatible with the socialist market economy with Chinese characteristics. In the past 40 years, profound changes have also taken place in modern monetary economics and worldwide policy practice of central banks. As the central bank of the world's largest emerging and developing economies in transition, China's monetary policy authorities face more complicated constraints, research of the People's Bank of China (PBC) provides a reliable support for promoting the development of China's financial system and central bank's scientific decision-making, which not only synchronizes with the world, but also has its own distinct characteristics. Based on the progress of monetary economics and the policy changes of central banks accompanying the ten-year cycle fluctuation of the world economy, and combined with the knowledge map analysis of the research of the Federal Reserve, European central banks and central banks of emerging economies, this paper summarizes worldwide research progress of central banks in the past 40 years and the experience of China, aiming at further promoting the theoretical research of the central bank and better facilitating the high-quality financial development. The first decade was the “great inflation” period from the late 1970s to the late 1980s. In order to tame the “inflation wild horse”, the modern quantity theory of money reached its peak, and monetary policy in developed economies shifted from discretionary choice to rule-based quantitative targeting. During this period, domestic research mainly focused on the coordination of finance and credit, the functions of the central bank and the restructuring of the financial system. Comprehensive balance theory of finance and credit has still been an important analytical framework in China's macroeconomic and financial fields up till now. The PBC became independent from the Ministry of Finance in 1978, marking that China began to distinguish the functions of fiscal management and financial regulation, and finance began to play a unique role in allocating social resources. The second decade was the first decade of the “great moderation” era from the late 1980s to the late 1990s, during which the monetary policy framework of “single target and single tool” was gradually established, and the “second central bank revolution” characterized by independence and inflation targeting was gradually launched. At the same time, influenced by the academic trend of “single target and single tool”, the separation between monetary policy and financial supervision gradually became the mainstream trend, and a large number of literatures on principal-agent and mechanism design also provided theoretical proof for this trend. During this period, emerging market countries were faced with the realistic shock of “trilemma” under the condition of open economy. In the 1990s, the PBC began to focus on the relationship between monetary policy and money supply, gradually scaled down the scope of direct intervention, and finally formed the monetary policy framework of indirect regulation in the modern sense with broad money supply as intermediate target, inflation-based multiple targets, comprehensive use of various policy tools, which was marked by the abolition of credit scale management and the reopening of RMB open market operations, and achieved the first major transformation of the monetary policy regulatory framework. At the same time, the PBC conducted a large number of in-depth studies on strengthening the micro-financial subject, building the financial market and improving the policy mechanism, which has strongly promoted the development, reform and opening up of China's financial system and provided the necessary micro-foundation and institutional conditions for indirect regulation. The third decade was the last decade of the “great moderation” era from the late 1990s to the outbreak of the international financial crisis in 2008. In this decade, research on financial liberalization became mainstream and led to global deregulation. “Race to the bottom” makes separate supervision extremely unsuitable for the trend of financial conglomeration, which has buried the hidden danger of financial crisis. Meanwhile, emerging economies have learned from the Asian financial crisis, actively adjusted their economic structures and policy systems, and thus accumulated sufficient experience and policy space to tackle the impact of the crisis. During this period, researchers of the PBC did not stick to the existing theories, but strived to tightly combine short-term macro-control with medium and long-term financial reform, and put forward theoretical analysis and policy propositions conducive to promoting financial reform according to China's actual conditions. It attached great importance to “online repair” of the financial system, completed the shareholding reform of state-owned commercial banks through the injection of foreign exchange reserves, and completed the reform of rural credit cooperatives through the replacement of central bank bills in an incentive-compatible manner, laying a good micro-foundation for resisting the impact of the global financial crisis. The classical “impossible triangle” theory is expanded, and the theory of intermediate institutional arrangement is explored and applied in Chinese practice. In terms of perfecting the transmission mechanism of monetary policy, the PBC has a good grasp of the balance between “quantity” and “price” in monetary control. In the fourth decade, which was after the “great recession” of 2008, the reflection of the crisis continues. The outbreak of the crisis exposed the defects of mainstream economic theory and the research paradigm. During this period, global central bank research mainly concentrated in four themes: introducing financial factors into general equilibrium models systematically, global experiments of unconventional monetary policy and its normalization, macro-prudential policy and prevention of systemic financial risks, and the new ideas and practices of financial development. Over the past decade, the PBC's research has been consistent with the post-crisis reflections of global central banks. Researchers of the PBC carried out analysis of macroeconomic models quite early in China, and were also one of the leaders in building dynamic stochastic general equilibrium (DSGE) models and applying DSGE models on Chinese issues. China has rich policy practice in using monetary policy tools to cope with the impact of the crisis. The PBC has stressed the importance of price stability while taking into account other objectives such as financial stability and attached great importance to the fundamental role of structural reform. The PBC has long been actively exploring the establishment of a macro-prudential policy framework suited to China's national conditions, and has been in the forefront of global mainstream theoretical research. Throughout the whole process of financial reform, development and stability, it has been applying the five new development concepts of innovation, coordination, green development, openness and sharing. Together with the international community, the PBC has made active explorations and useful innovations in both theory and practice. As an area closely linked to policy, real challenges have always been the greatest motivation of central bank research. At present, China is still faced with two long-standing structural contradiction in financing system, namely, low proportion of direct financing, especially equity financing, and imbalance between the financing status of small and micro enterprises and private enterprises and their proportions in the national economy. The new mission of deepening financial structural reform calls for a new breakthrough in the theory of financial structural reform in China. It also makes us look forward to achieving greater results as soon as possible under the impetus of deepening financial supply-side structural reform.
陈雨露. 四十年来中央银行的研究进展及中国的实践[J]. 金融研究, 2019, 464(2): 1-19.
CHEN Yulu. Research Progress of Central Banks in the Past 40 Years and Practices of the People's Bank of China. Journal of Financial Research, 2019, 464(2): 1-19.
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