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What measures Chinese monetary policy?

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  • Sun, Rongrong

Abstract

This paper models the PBC's operating procedures in a two-stage vector autoregression framework. We decompose changes in policy variables into exogenous and endogenous components in order to find a “clean” monetary policy indicator whose changes are mainly policy induced. Our main findings are twofold. First, the PBC's operating procedures have evolved over time; since about 2006, they have developed to a relatively stable regime. Second, its operating procedures are neither pure interest rate targeting nor pure reserves targeting, but a mixture. A set of indicators all contain information about the policy stance. Finally, we construct a new composite indicator of the overall policy stance.

Suggested Citation

  • Sun, Rongrong, 2015. "What measures Chinese monetary policy?," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 263-286.
  • Handle: RePEc:eee:jimfin:v:59:y:2015:i:c:p:263-286 DOI: 10.1016/j.jimonfin.2015.07.009
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    Cited by:

    1. Makram El-Shagi & Lunan Jiang, 2017. "China Monetary Policy Transmission in China: Dual Shocks with Dual Bond Markets," CFDS Discussion Paper Series 2017/2, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    2. Sun, Rongrong, 2014. "Review over Empirical Evidence on Real Effects of Monetary Policy," MPRA Paper 58513, University Library of Munich, Germany.
    3. Chen, Hongyi & Chow, Kenneth & Tillmann, Peter, 2017. "The effectiveness of monetary policy in China: Evidence from a Qual VAR," China Economic Review, Elsevier, vol. 43(C), pages 216-231.
    4. Klingelhöfer, Jan & Sun, Rongrong, 2017. "Macroprudential Policy, Central Banks and Financial Stability: Evidence from China," MPRA Paper 79033, University Library of Munich, Germany.
    5. Sun, Rongrong, 2015. "A Narrative Indicator of Monetary Conditions in China," MPRA Paper 64166, University Library of Munich, Germany.

    More about this item

    Keywords

    Monetary policy; VAR; Operating procedures; Exogenous (endogenous) components;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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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