China’s monetary policy and the exchange rate
AbstractThe paper models monetary policy in China using a hybrid McCallum-Taylor empirical reaction function. The feedback rule allows for reactions to inflation and output gaps, and to developments in a trade-weighted exchange rate gap measure. The investigation finds that monetary policy in China has, on average, accommodated inflationary developments. But exchange rate shocks do not significantly affect monetary policy behavior, and there is no evidence of a structural break in the estimated reaction function at the end of the strict dollar peg in July 2005. The paper also runs an exercise incorporating survey-based inflation expectations into the policy reaction function and meets with some success.
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Bibliographic InfoPaper provided by Bank of Finland, Institute for Economies in Transition in its series BOFIT Discussion Papers with number 10/2010.
Length: 27 pages
Date of creation: 20 Jul 2010
Date of revision:
Contact details of provider:
Postal: Bank of Finland, BOFIT, P.O. Box 160, FI-00101 Helsinki, Finland
Phone: + 358 10 831 2268
Fax: + 358 10 831 2294
Web page: http://www.suomenpankki.fi/bofit_en/
More information through EDIRC
exchange rate; hybrid McCallum-Taylor monetary policy reaction function; SVAR; survey-based inflation expectations; China;
Other versions of this item:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- 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-2010-08-28 (All new papers)
- NEP-CBA-2010-08-28 (Central Banking)
- NEP-MAC-2010-08-28 (Macroeconomics)
- NEP-MON-2010-08-28 (Monetary Economics)
- NEP-TRA-2010-08-28 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guonan Ma & RobertN McCauley, 2008. "Efficacy Of China'S Capital Controls: Evidence From Price And Flow Data," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 104-123, 02.
- Mehrotra, Aaron & Sánchez-Fung, José R., 2010.
"China’s monetary policy and the exchange rate,"
BOFIT Discussion Papers
10/2010, Bank of Finland, Institute for Economies in Transition.
- Aaron Mehrotra & Jos� R S�nchez-Fung, 2010.
"China's Monetary Policy and the Exchange Rate,"
Comparative Economic Studies,
Palgrave Macmillan, vol. 52(4), pages 497-514, December.
- Mehrotra, Aaron & Sánchez-Fung, José R., 2010. "China’s monetary policy and the exchange rate," BOFIT Discussion Papers 10/2010, Bank of Finland, Institute for Economies in Transition.
- Aaron Mehrotra & José R. Sánchez-Fung, 2010. "China’s monetary policy and the exchange rate," Working Paper Series 2010-19, Federal Reserve Bank of San Francisco.
- Marjan Petreski & Branimir Jovanovic, 2013. "Monetary Policy in China: The Role of the Qualitative Instruments," Transition Studies Review, Springer, vol. 20(3), pages 437-442, November.
- Yutaka Kurihara, 2012. "Exchange rate determination and structural changes in response to monetary policies," Studies in Economics and Finance, Emerald Group Publishing, vol. 29(3), pages 187-196, August.
- Shujie Yao & Dan Luo & Lixia Loh, . "On China’s Monetary Policy and Asset Prices," Discussion Papers 11/04, University of Nottingham, GEP.
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