Neutralization in China: evidence from the balance sheet of the People’s Bank of China
We evaluate China’s neutralization policy by monthly estimations based on the central bank balance sheet from 1999:6 to 2011:6. Our results suggest that China effectively neutralizes 66% of the change of net foreign assets under a pegged currency regime. Consequently, a purchase of one yuan of net foreign assets leads to an effective increase of 1.4 yuan in the money supply, rather than 4 yuan in the absence of neutralization. In the face of rapid growth of foreign reserves, neutralization in China is becoming increasingly difficult, consistent with Mundell’s hypothesis.
Volume (Year): 15 (2012)
Issue (Month): 1 (March)
|Contact details of provider:|| Web page: http://www.tandfonline.com/GPRE19|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/GPRE19|
When requesting a correction, please mention this item's handle: RePEc:taf:jpolrf:v:15:y:2012:i:1:p:25-31. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Michael McNulty)
If references are entirely missing, you can add them using this form.