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《Financial Economics Research》 2018-02
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Study on Optimal Combination of Quantity-Based and Price-Based Regulations:An Analysis Using the DSGE Model

Li Chenggang;Yang Bing;School of Finance,Guizhou University of Finance and Economics;  
With the change of the economic environment,both quantity-based regulation and price-based regulation used independently are insufficient to maintain and respond to the steady development of the macroeconomy in China. Therefore,this study constructed a hybrid monetary policy model with selective features that combined both types of regulation. The dynamic stochastic general equilibrium( DSGE) model was adopted,and calibration and Bayesian probability methods were applied to estimate the parameters of quantity-based regulation,price-based regulation,and hybrid regulation. Next,impulse response analysis,variance decomposition,and welfare loss were introduced to compare the political applicability of the three types of regulation.Impulse response and welfare losses were then used to explore the optimal combination of quantity-based and price-based regulation. The results suggested that central banks' implementation of hybrid regulation is superior to that of quantity-based and price-based regulation. Hybrid regulation was found to be beneficial in reducing the amplitude of macroeconomic fluctuations,and its effect on improving social welfare was more pronounced. It was found that an optimal proportion of the quantity-based and price-based regulations were approximately 40% to 60%; as such,a combination of the two could minimize the fluctuations caused by economic shocks,reduce welfare losses,and improve social welfare.
【Fund】: 国家自然科学基金项目(71561007);; 贵州省哲学社会科学规划青年项目(14GZQN07);; 国家留学基金资助
【CateGory Index】: F124;F822.0
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