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Confidence in Chinese monetary policy

Author

Listed:
  • Zhang, Chengsi
  • Sun, Yuchen

Abstract

Is confidence an important channel through which monetary policy affects the Chinese real economy? To answer this question, this paper uses a counterfactual structural vector autoregression method and examines the impulse responses of entrepreneurs’ confidence to a monetary supply shock for China. The empirical results show that an easing monetary policy can inspire confidence and stimulate economic growth. However, the effectiveness of a positive policy will be undermined if the channel of confidence is removed. Further analysis reveals that the state of confidence matters for credit and pricing decisions. These findings are robust to different measures of monetary policy in China.

Suggested Citation

  • Zhang, Chengsi & Sun, Yuchen, 2017. "Confidence in Chinese monetary policy," International Review of Economics & Finance, Elsevier, vol. 52(C), pages 212-221.
    • Handle: RePEc:eee:reveco:v:52:y:2017:i:c:p:212-221
    DOI: 10.1016/j.iref.2017.01.009
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    Citations

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    Cited by:

    1. Lien, Donald & Sun, Yuchen & Zhang, Chengsi, 2021. "Uncertainty, confidence, and monetary policy in China," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1347-1358.
    2. srithilat, khaysy & Sun, Gang, 2017. "The Impact of Monetary Policy on Economic Development: Evidence from Lao PDR," MPRA Paper 79369, University Library of Munich, Germany, revised 27 Apr 2017.
    3. Makram El-Shagi & Yishuo Ma, 2021. "Nine blind men and the PBoC," CFDS Discussion Paper Series 2021/2, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.

    More about this item

    Keywords

    Confidence; Monetary Policy; Counterfactual Analysis; SVAR;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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