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Monetary policy based on nonlinear quantity rule: Evidence from China

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  • Ma, Yong

Abstract

This paper investigates nonlinearities in a quantity-based monetary policy rule for China within a New Keynesian DSGE model. Empirical results from Bayesian estimation show that the central bank of China has adopted a nonlinear quantity rule over the period of 1992Q1–2013Q3. Moreover, evidence from sub-period estimation further indicates that there is a significant policy regime shift leading towards a more strict inflation targeting regime during 1999Q1–2013Q3. From a policy perspective, the nonlinear quantity rule proposed in this paper provides us with a useful tool for describing and analyzing monetary policies in emerging market economies.

Suggested Citation

  • Ma, Yong, 2014. "Monetary policy based on nonlinear quantity rule: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 34(C), pages 89-104.
  • Handle: RePEc:eee:reveco:v:34:y:2014:i:c:p:89-104
    DOI: 10.1016/j.iref.2014.07.007
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    Cited by:

    1. Yong Ma, 2016. "Policy Shocks and Macroeconomic Fluctuations in a Two-country Dynamic Stochastic General Equilibrium Model: Evidence from China," Asian Economic Journal, East Asian Economic Association, vol. 30(1), pages 25-45, March.
    2. Yong Ma & Yulu Chen, 2014. "Financial Imbalance Index as a New Early Warning Indicator: Methods and Applications in the Chinese Economy," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 22(6), pages 64-86, November.
    3. Kuosmanen, Petri & Nabulsi, Nasib & Vataja, Juuso, 2015. "Financial variables and economic activity in the Nordic countries," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 368-379.
    4. Paul G. Egan & Anthony J. Leddin, 2016. "Examining Monetary Policy Transmission in the People's Republic of China–Structural Change Models with a Monetary Policy Index," Asian Development Review, MIT Press, vol. 33(1), pages 74-110, March.

    More about this item

    Keywords

    Monetary policy; Nonlinear quantity rule; New Keynesian model;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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