In this thesis, we test the effectiveness of money supply as the intermediate target of monetary policy. We analyzed the measurability and controllability of money supply and find challenges of accurate measurement and unstable control of money supply under circumstances of rapid liquidity. By estimating vector autoregressive models using quarterly data from 1995 to 2006, we tested the correlation of intermediate targets (money supply, interest rates, and exchange rates) and the ultimate goals (promoting economic growth and stabilizing prices) of monetary policy. Over the long term, we identified the relationships between these variables. Additionally, we found that the interest rates can predict economic growth and price level to some extent and all variables can predict price level well. We applied the impulse response function and variance decomposition of vector autoregressive models to analyze the short term effect, and found that the use of the interest rate fits the intermediate target better, because it has largest powerful impact on GDP and CPI under the restricted conditions. Therefore, setting the interest rate as the intermediate target can be realized in the future.