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China's Monetary Policy and Its Transmission Mechanisms Before and After the Financial Tsunami

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  • Che-cheong Poon
  • Fuk-kin Wong

Abstract

Since 2000 the Chinese economy has consistently maintained its rapid growth momentum. It has recently also experienced a high degree of volatility that is mainly due to overheating and shock absorbed from the 2008 global financial tsunami. In light of the economic instability derived from the financial tsunami, this article examines empirical evidence regarding the effectiveness of China's monetary policy to dampen the swing of economic cycles. Using the vector autoregression (VAR) model, it concludes that a traditional Keynesian interest-rate channel was China's major monetary transmission mechanism before the financial tsunami, but afterward it changed to an asset-price channel.

Suggested Citation

  • Che-cheong Poon & Fuk-kin Wong, 2011. "China's Monetary Policy and Its Transmission Mechanisms Before and After the Financial Tsunami," Chinese Economy, Taylor & Francis Journals, vol. 44(3), pages 84-108, May.
    • Handle: RePEc:mes:chinec:v:44:y:2011:i:3:p:84-108
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    Cited by:

    1. Jingya Li & Ming-Hua Liu, 2019. "Interest rate liberalization and pass-through of monetary policy rate to bank lending rates in China," Frontiers of Business Research in China, Springer, vol. 13(1), pages 1-19, December.
    2. Mai, Nhat Chi, 2014. "Monetary transmission mechanism analysis in a small, open economy: the case of Vietnam," OSF Preprints ybc8p, Center for Open Science.
    3. Lombardi, Domenico & Siklos, Pierre L. & Xie, Xiangyou, 2018. "Monetary policy transmission in systemically important economies and China’s impact," Journal of Asian Economics, Elsevier, vol. 59(C), pages 61-79.

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