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The international transmission of Chinese monetary policy and the commodity channel

Author

Listed:
  • Fabrizio Ferriani

    (Bank of Italy)

  • Andrea Gazzani

    (Bank of Italy)

Abstract

This paper examines the international transmission of Chinese monetary policy. We show that, unlike the financial channel typical of US monetary policy, Chinese policy shocks propagate through a real-side demand mechanism, driven by monetary-fiscal interactions that stimulate commodity-intensive infrastructure investment. Consistent with this channel, metal and energy commodity prices are the most responsive to Chinese monetary policy shocks. We quantify the resulting inflationary spillovers using counterfactual methods. The commodity channel accounts for approximately 70 per cent of producer price spillovers to advanced economies, with the largest impact concentrated in countries heavily dependent on commodity imports, such as the four largest European economies. Finally, Chinese monetary policy significantly affects financing conditions in commodity-exporting emerging markets.

Suggested Citation

  • Fabrizio Ferriani & Andrea Gazzani, 2025. "The international transmission of Chinese monetary policy and the commodity channel," Temi di discussione (Economic working papers) 1510, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:wptemi:td_1510_25
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    File URL: https://www.bancaditalia.it/pubblicazioni/temi-discussione/2025/2025-1510/en_tema_1510.pdf
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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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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