McCallum rule and Chinese monetary policy
AbstractThis paper evaluates the usefulness of a McCallum monetary policy rule based on money supply for maintaining price stability in mainland China. We examine whether excess money relative to rulebased values provides information that improves the forecasting of price developments. The results suggest that our monetary variable helps in predicting both consumer and corporate goods price inflation, but the results for consumer prices depend on the forecasting period. Nevertheless, growth of the Chinese monetary base has tracked the McCallum rule quite closely. Moreover, results using a structural vector autoregression suggest that our measure of excess money supply could be used to identify monetary policy shocks in the Chinese economy.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 15/2008.
Length: 29 pages
Date of creation: 21 Nov 2008
Date of revision:
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More information through EDIRC
McCallum rule; monetary policy; China;
Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-01 (All new papers)
- NEP-CBA-2008-12-01 (Central Banking)
- NEP-CNA-2008-12-01 (China)
- NEP-MAC-2008-12-01 (Macroeconomics)
- NEP-MON-2008-12-01 (Monetary Economics)
- NEP-TRA-2008-12-01 (Transition Economics)
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