Monetary Policy Regulation and Macroeconomic Fluctuations—Empirical Research Based on VAR Model

The objective of this study is to investigate the effect of changes in the money supply and interest rates on the gross domestic product (GDP) and the consumer price index (CPI), respectively. The Taylor Rule and the VAR model will be utilized, along with least squares estimation and impulse response functions. As a consequence of this study's findings, various instruments of monetary policy will be compared in order to evaluate the efficacy of the policy effect that macroeconomic fluctuations have on monetary policy. After analysis, it is concluded that the interest rate, a price-based monetary policy tool, is more sensitive to macroeconomic fluctuations and has a more significant adjustment to macroeconomic fluctuations. In the future, according to this paper, It is crucial that the central bank focus more on interest rate-based price management.