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| Analysis of the Level and Volatility Effects of China's Monetary Policy on Output and Inflation：Empirical Analysis of Impulse Response Function Based on VAR Model and Local Projection Model |
| LIU Jinquan1,2, SUN Yuxiang1, ZHOU Xin1 |
1.School of Business and Management, Jilin University
2.School of Economics and Statistics, Guangzhou University |
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Abstract: Under the “triple pressures”, China's monetary policy should achieve the “double stability” of “stable growth” and “inflation prevention” in the level and volatility, not only to maintain moderate economic growth, but also to prevent the rapid rise of inflation, and to prevent the economic risks caused by output and inflation fluctuations. Therefore, we use local projection method and VAR model to calculate the impulse response functions of quantitative and price-based monetary policies to characterize the dynamic effects of monetary policy on the level and volatility of output growth rate and inflation rate. The empirical study finds that quantitative monetary policy has significant positive effects on economic growth rate and inflation rate, and also has the impact effect of reducing output volatility and increasing inflation volatility; Price-based monetary policy has a significant positive effect on economic growth rate and inflation rate, and also has a dual stabilizing function of reducing output volatility and inflation volatility. Therefore, the current monetary policy operation should still focus on price-based monetary policy, so as to realize the counter-cyclical and cross-cyclical regulation of monetary policy.
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Received: 12 September 2022
Published: 15 January 2023
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2023, Vol. 43 
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