The choice of the intermediate target of China's monetary policy has experienced changes from the cash in circulation to the loan scale and then to the money supply. With the cancellation of loan scale control in China from 65438 to 0998, China's monetary policy has changed from direct regulation to indirect regulation, and money supply has always been the only intermediary goal of monetary policy. 2 evaluation of money supply as an intermediate target of monetary policy 2. 1 main criteria and objective conditions (1) main criteria. Relevance: As an intermediary indicator, financial indicators are bound to be closely related to the ultimate goal, and the change of intermediary indicators will inevitably have a predictable impact on the ultimate goal. Measurability: the rapid and accurate measurement of financial indicators as intermediary indicators is the premise of effective control. On the one hand, the central bank can quickly obtain accurate data of these indicators; On the other hand, these indicators must be clearly defined and easy to observe, analyze and monitor. Controllability: As an intermediary indicator, it must be a financial indicator that the central bank can effectively control by using monetary policy tools. Anti-interference: As an intermediary indicator, financial indicators should accurately reflect the policy effect and be less interfered by external factors. (2) objective conditions. The relationship between various economic indicators is restricted and influenced by factors such as economic management system, market development level and economic development level. Therefore, we should not only meet the selection criteria as much as possible, but also pay attention to the objective conditions of each country in each period. 2.2 the evaluation of money supply shows that M 1 has almost no correlation with GDP, and M2 has a certain correlation with GDP, but it is not very big. (1) testability analysis. There are still some defects in the statistical caliber of China's money supply, and the IMF and China have different definitions of M2. For example, the margin balance of stock accounts is not included in M2 published by the central bank. At the same time, China stipulates that time deposits can be withdrawn in advance at any time by depositors with valid certificates, which brings difficulties to accurately count M 1 and M2. (2) Controllability analysis. Judging from the actual operation effect, the target value deviates greatly from the actual value, and the difference fluctuates greatly, which is difficult to reflect the controllability of the central bank on the money supply. The change of money supply depends on both the change of base money and the change of money multiplier. The latter is influenced by many factors and not completely controlled by the central bank. A successful monetary policy aimed at money supply requires three conditions: first, the function of money demand is stable; Second, the target money supply should be controlled by the central bank; Third, the intermediary target should be the leading indicator of inflation. These conditions are often difficult to meet in practice. 2.3 Evaluation of interest rate (1) Advantages of interest rate as an intermediary indicator: ① It can not only reflect the supply state of money and credit, but also show the relative changes of supply and demand. The rise in interest rates indicates that monetary policy is tightening, on the contrary, it indicates that monetary policy is loose. (2) The central bank can use policy tools for effective control. ③ Data can be easily collected and obtained in time. (4) Strong strength, wide influence and high correlation with monetary policy objectives. (2) Disadvantages of interest rate as an intermediary indicator: ① The central bank can control the nominal interest rate, but it is the expected real interest rate that has a substantial impact on economic operation. ② The influence of interest rate on economic activities depends more on the sensitivity of market subjects to changes in economic returns, that is, the interest rate elasticity of money demand. 3 Comparison of the advantages and disadvantages of money supply and interest rate as intermediary indicators 3. 1 Interest rate and money supply cannot be used as intermediary indicators at the same time. Due to unexpected changes in economic growth rate and inflation rate, money demand will fluctuate. If we pursue the goal of monetary aggregate, it means that interest rates fluctuate. On the other hand, if the central bank keeps an eye on the interest rate target, it will lead to fluctuations in the money supply. 3.2 The comparison of money supply and interest rate as intermediary indicators (1) can be measured. On the surface, interest rate seems to be more convenient to measure than money supply, and it seems to be more useful as an intermediary indicator. Compared with the total amount of money, interest rate data can not only be obtained faster, but also more accurate and rarely revised. The money supply needs to be revised many times. But the interest rate that can be obtained quickly and accurately is the nominal interest rate, which cannot be used to measure the real cost of borrowing. Real cost is of great significance to predict the change of GDP. The actual cost can be measured by the expected real interest rate. The expected real interest rate is equal to the nominal interest rate minus the inflation rate. (2) controllability. The controllability of the money supply shows that the central bank does have some control over the total money supply. In addition, the central bank also controls the market interest rate by opening the market business, adjusting the rediscount interest rate, and even directly setting the interest rate. But the central bank can only control the nominal interest rate, but not the real interest rate. (3) Relevance to the ultimate goal. Both money supply and interest rate have an important influence on economic activities. (4) It is difficult to compare the advantages and disadvantages of money supply and interest rate indicators directly from the criteria for selecting indicators. Generally speaking, countries choose according to the economic situation in a certain period and the convenience of central bank operation. 4 Suggestions on the Intermediate Target of Monetary Policy (1) Recently, on the basis of controlling the measurability, controllability and correlation of money supply, we continue to regard money supply as the intermediate target of China's current monetary policy. In China, the scale and efficiency of financial institutions are not satisfactory, the financial market is relatively closed, the financial instruments are relatively single, there are not many financial products available for investment in the financial market, and the financial assets of residents and enterprises are still mainly bank deposits. This simple financial market structure is conducive to measuring the money supply. Simple financial structure is easy to make a stable functional relationship between the target variable and the total amount of money, and it is relatively difficult for the central bank to control the target money supply. (2) Adjust the statistical caliber of money supply. With the deepening of financial marketization, it is necessary to reasonably define and adjust the level of money supply and its respective statistical intervals to meet the needs of monetary policy regulation and enhance the correlation between money supply and the ultimate goal of monetary policy. (2) Expand the floating range of the money supply target. The central bank must first forecast the inflation rate and other targets, and then determine the base of the money supply target according to these forecast values, and determine the fluctuation range of the target interval according to the accuracy of the forecast. (3) Improve the ability to predict the change of currency multiplier. In different periods, the change trend of money multiplier is different: in the period of deflation, people's psychology of holding money for purchase is enhanced, and the speed of money circulation is reduced, thus reducing the money multiplier; In the uncertain period of future income and expenditure, people's preventive action will greatly reduce the growth rate of money multiplier; During the boom period, people's speculation will increase the nominal demand for money and make the money multiplier rise. Therefore, the Bank of China needs to constantly summarize the changing law of the money multiplier and improve its forecasting ability. (4) Accelerate the supporting financial reform, strengthen the empirical research on the intermediate target of monetary policy, and adjust the money supply to interest rate or other intermediate target of monetary policy that adapts to the economic and financial situation at that time when the time is ripe according to China's changing economic and financial situation.