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Comparisons of different monetary policies in China with yield curve information

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  • Pang, Iris Ai Jao
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    Abstract

    This work compares the effectiveness of quantity-based and price-based monetary policies in China using FAVAR. This essay is the pioneer to identify the 1-year lending rate and deposit rate as the policy rates, and includes yield curve information in the analysis. It is found that effects of tightening monetary policies in China follow largely the stylized facts of long run neutrality of money on real activities, a long term fall in inflation and a short term rise in interest rates.

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    File URL: http://mpra.ub.uni-muenchen.de/32494/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 32494.

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    Date of creation: 10 May 2010
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    Handle: RePEc:pra:mprapa:32494

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    Related research

    Keywords: China; Monetary Policy; Factor Model; Factor Augmented VAR; FAVAR;

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    1. Diebold, Francis X. & Li, Canlin, 2003. "Forecasting the term structure of government bond yields," CFS Working Paper Series 2004/09, Center for Financial Studies (CFS).
    2. Mehrotra, Aaron & Koivu, Tuuli & Nuutilainen, Riikka, 2008. "McCallum rule and Chinese monetary policy," BOFIT Discussion Papers 15/2008, Bank of Finland, Institute for Economies in Transition.
    3. Dickinson, David & Liu, Jia, 2007. "The real effects of monetary policy in China: An empirical analysis," China Economic Review, Elsevier, vol. 18(1), pages 87-111.
    4. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-62, April.
    5. Qin, Duo & Quising, Pilipinas & He, Xinhua & Liu, Shiguo, 2005. "Modeling monetary transmission and policy in China," Journal of Policy Modeling, Elsevier, vol. 27(2), pages 157-175, March.
    6. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2004. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," NBER Working Papers 10220, National Bureau of Economic Research, Inc.
    7. Bernard Laurens & Rodolfo Maino, 2007. "China," IMF Working Papers 07/14, International Monetary Fund.
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