Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies
AbstractIn recent years, China has faced an increasing trilemmahow to maintain independent monetary policy and limit exchange rate flexibility simultaneously, while at the same time facing persistent and substantial international capital flows. This paper undertakes an empirical investigation to evaluate the effectiveness of Chinas sterilizations and capital mobility regulations, measured by the sterilization and offset coefficients respectively, using monthly data between mid 1999 and March 2009. We find that the effectiveness of Chinas sterilization is almost perfect in terms of the monetary base, while it is nearly half in light of M2, and the extent of Chinas capital mobility regulations still works but not well binds. Recursive estimation finds evidence of increasing mobility of capital flows and decreasing extent of sterilizations that may undercut Chinas ability to seek monetary autonomy and domestic currency stability simultaneously.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 23038.
Date of creation: Jan 2010
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More information through EDIRC
Effectiveness; Capital Mobility; International Reserves; Sterilization;
Find related papers by JEL classification:
- 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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- Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010.
"China as a reserve sink: The evidence from offset and sterilization coefficients,"
Journal of International Money and Finance,
Elsevier, vol. 29(5), pages 951-972, September.
- Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007. "China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients," Working Papers 102007, Hong Kong Institute for Monetary Research.
- Joshua Aizenman & Reuven Glick, 2008.
"Sterilization, monetary policy, and global financial integration,"
Working Paper Series
2008-15, Federal Reserve Bank of San Francisco.
- Joshua Aizenman & Reuven Glick, 2009. "Sterilization, Monetary Policy, and Global Financial Integration," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 777-801, 09.
- Joshua Aizenman & Reuven Glick, 2008. "Sterilization, Monetary Policy, and Global Financial Integration," NBER Working Papers 13902, National Bureau of Economic Research, Inc.
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