| Summary: | 碩士 === 國立臺灣大學 === 國家發展研究所 === 105 === After the 2008 financial crisis, many studies have begun to review monetary policy and attempted to find new paths or make adjustments to the current policy framework. Price level targeting is one such approach. In this paper, we selected China’s transforming exchange rate policy to study and calculate the nominal effective exchange rate (NEER) indexes of fixed price level, 2% inflation, and PPI-pegging where domestic price stability was considered in different ways based on the theory of Purchasing Power Parity. Also, we compared these “price-stability” NEER with the current NEER results without consideration of price stability. The proposed approach led to two important findings: 1) NEER indexes considering price stability point to a relatively neutral monetary policy while the current NEER results demonstrate an easing policy, one which Chinese authorities have already implemented recently, meaning that the monetary policy conducted has run substantially counter to the idea of price stability; 2) the standard deviation of the former price-stability NEER indexes was smaller than that of the current NEER results, meaning that these price targeting practices could also stabilize the exchange rate. Thus, we suggest that using the RMB exchange rate as a tool to implement RMB price level targeting is a feasible method.
Furthermore, when we extended those two groups of NEER indexes to another hot issue – the housing boom effect in China, the regression model based on the theory of Poterba (1984) turned out that the lag period of the NEER indexes had a significantly positive influence to the house price. These regression analyses not only confirmed that the adjustment of monetary policy along with the implications of the NEER indexes would have spillover effects on the house prices, but also showed the inconsistent results in different regions. The NEER indexes of fixed price level and 2% inflation would bring smaller positive impact, compared to the NEER indexes without price-stability consideration, to the house price of Beijing, Shanghai, and Shenzhen but stronger impact to Guangzhou and the national level. According to the empirical outcomes, the authorities should be very careful when conduct monetary policy because its discrepant spillover effect.
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