A Conjecture of Chinese Monetary Policy Rule: Evidence from Survey Data, Markov Regime Switching, and Drifting Coefficients
AbstractThis paper studies a modified Chinese Taylor¡¯s rule with money supply growth rate as the intermediate target. We develop survey data to measure the expected inflation and use the real marginal cost as a proxy for the output gap. The Markov regime switching model, the TVP model and the split sample OLS estimation are employed to estimate the changing coefficients of the monetary reaction function. We find that there were two structural changes in the Chinese monetary policy rule, which take the form of discrete jumps rather than continuous adjustments. Besides, the Chinese central bank is not purely forward-looking as most literature assumed.
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Bibliographic InfoArticle provided by Society for AEF in its journal Annals of Economics and Finance.
Volume (Year): 10 (2009)
Issue (Month): 1 (May)
Taylor¡¯s rule; Survey data; Real marginal cost; TVP model; Markov regime switching model;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
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