Financial Cycles and Monetary Policy: An Empirical Analysis based on McCallum Rule

Abstract

Based on the construction of the comprehensive financial cycle index, this paper uses the McCallum rule to empirically test the interaction mechanism between financial cycle and monetary policy. The results show that the interaction between the financial cycle and monetary policy has certain "asymmetry" characteristics; the impact of the financial cycle on the real economy, causing changes in the money supply, and promoting the adjustment of China's monetary policy; at the same time, due to the financial cycle Considering the impact, China's monetary policy has a strong countercyclicality in the short term, and the monetary policy control effect based on the McCallum rule is relatively significant. To this end, China must focus on promoting financial reforms focusing on diversification of market entities, orderly market competition, and legalization of financial supervision, so as to better eliminate external shocks caused by financial cycle fluctuations and continuously enhance monetary policy promotion. The effect of real economic growth.