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Money Market Operations in China: Monetary Policy or FX Policy?

Author

Listed:
  • Shigeto Nagai

    (Bank of Japan)

  • Hong Wang

    (Bank of Japan)

Abstract

This paper discusses the role of money market operations by the Chinese central bank in a transition period of the monetary policy framework. We argue that in recent years, especially before and after the change in the foreign exchange rate regime in July 2005, money market operations have been focused mainly on China-US interest rate differentials, which significantly influence the RMB exchange rate. On the other hand, the task of demand control for the purpose of price stability continues to rely on direct control measures taken by the central bank and other government agencies with respect to bank lending and investment.

Suggested Citation

  • Shigeto Nagai & Hong Wang, 2007. "Money Market Operations in China: Monetary Policy or FX Policy?," Bank of Japan Working Paper Series 07-E-13, Bank of Japan.
    • Handle: RePEc:boj:bojwps:07-e-13
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    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2007/data/wp07e13.pdf
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    References listed on IDEAS

    as
    1. Marvin Goodfriend & Eswar Prasad, 2009. "A Framework for Independent Monetary Policy in China," Chapters, in: Gill Hammond & Ravi Kanbur & Eswar Prasad (ed.), Monetary Policy Frameworks for Emerging Markets, chapter 8, Edward Elgar Publishing.
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    Cited by:

    1. Reade, J. James & Volz, Ulrich, 2010. "Chinese monetary policy and the dollar peg," Discussion Papers 2010/35, Free University Berlin, School of Business & Economics.
    2. Anders C. Johansson, 2012. "China’s Growing Influence in Southeast Asia – Monetary Policy and Equity Markets," The World Economy, Wiley Blackwell, vol. 35(7), pages 816-837, July.
    3. Stefan Angrick & Naoyuki Yoshino, 2020. "From Window Guidance to Interbank Rates: Tracing the Transition of Monetary Policy in Japan and China," International Journal of Central Banking, International Journal of Central Banking, vol. 16(3), pages 279-316, June.
    4. repec:zbw:bofitp:2018_004 is not listed on IDEAS
    5. Stefan Angrick & Naoyuki Yoshino, 2020. "From Window Guidance to Interbank Rates: Tracing the Transition of Monetary Policy in Japan and China," International Journal of Central Banking, International Journal of Central Banking, vol. 16(3), pages 279-316, June.

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