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Narrative monetary policy expectation in China

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Listed:
  • Zhu, Dandan
  • Wang, Xiangdong
  • Zhang, Yifan

Abstract

This study introduces a novel narrative monetary policy expectation (MPEN) index for China, constructed through the semantic analysis of more than one million economic news articles. While our MPEN aligns with macro- and micro-survey-based monetary policy expectation indicators, it offers distinct advantages, including higher frequency, timeliness, and cost-effectiveness. Employing a time-varying parameter vector autoregression model, we find that the expectation of expansionary monetary policy is associated with economic downturns or inflation declines. Furthermore, monetary policy expectation is more responsive to GDP during downturns and more sensitive to CPI during economic booms.

Suggested Citation

  • Zhu, Dandan & Wang, Xiangdong & Zhang, Yifan, 2025. "Narrative monetary policy expectation in China," China Economic Review, Elsevier, vol. 94(PB).
    • Handle: RePEc:eee:chieco:v:94:y:2025:i:pb:s1043951x25002263
    DOI: 10.1016/j.chieco.2025.102568
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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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