An Empirical Research on the Money-Supply Effect of Inflation Expectation When Managing Inflation Expectation in China - Based on Cagan Model and Lucas Microeconomic Rational Expectation Equation

Today, every country´s economic policies now are causing inflation and strengthening Inflation Expectation. Without doubt, comprehending appropriately Inflation Expectation effects, especial its money-supply effect, is the important basis to manage Inflation Expectation and suppress inflation. The paper first introduces briefly rational expectation and its econometric expression; gives monetary supply´s response to inflation expected by rational expectation by the model combined Cagan model and Lucas microeconomic rational expectation equation; points out that estimating and researching the mechanism of Inflation Expectation in China and its influence to monetary supply when managing Inflation Expectation is crucially necessary for achieve the goal of the economic policy.