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Analysis and Prospects of China’s Monetary Policy: Based on the New Keynesian Model

In: Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025)

Author

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  • Jundengxian Li

    (Macau University of Science and Technology, Faculty of Business)

Abstract

China’s economy demonstrated its strong resilience and stability in the first half of 2024. China’s gross domestic product (GDP) in the first half of 2024 was 61.7 trillion yuan, up 5.0% year-on-year. Under such a poor external environment, China’s economy still continued to recover to a positive trend, in which monetary policy is a major stabilizer of the national economy to enhance. Based on the New Keynesian theory, this paper analyzes the great role of the monetary policy released by the People’s Bank of China in the third quarter of 2024 in continuing to improve the national economy and encouraging the stimulation of public consumption. In the theoretical background of the New Keynesian model, this paper combines the monetary policy implementation reports of the second and third quarters of 2024 to explore, aiming at verifying the effectiveness of the government’s regulatory role as well as supplementing and looking forward to the policy deficiencies, and concludes that it is found that New Keynesianism has a decisive role to play in ameliorating short-term recessions, optimizing the transmission mechanism of the monetary policy as well as making the funds flow effectively to the real economy. It is hoped that the results of the research can provide positive guidance for China’s monetary policy in the coming quarter and even in the coming year.

Suggested Citation

  • Jundengxian Li, 2025. "Analysis and Prospects of China’s Monetary Policy: Based on the New Keynesian Model," Advances in Economics, Business and Management Research, in: Maizaitulaidawati Md Husin (ed.), Proceedings of the 2025 International Conference on Financial Risk and Investment Management (ICFRIM 2025), pages 434-439, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-748-9_48
    DOI: 10.2991/978-94-6463-748-9_48
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