Model Structure and the Combined Welfare and Trade Effects of China's Trade Related Policies
In recent years, China has faced an increasing trilemmahow to maintain independent monetary policy and limit exchange rate flexibility simultaneously, while at the same time facing persistent and substantial international capital flows. This paper undertakes an empirical investigation to evaluate the effectiveness of Chinas sterilizations and capital mobility regulations, measured by the sterilization and offset coefficients respectively, using monthly data between mid 1999 and March 2009. We find that the effectiveness of Chinas sterilization is almost perfect in terms of the monetary base, while it is nearly half in light of M2, and the extent of Chinas capital mobility regulations still works but not well binds. Recursive estimation finds evidence of increasing mobility of capital flows and decreasing extent of sterilizations that may undercut Chinas ability to seek monetary autonomy and domestic currency stability simultaneously.
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- Ouyang, Alice Y. & Rajan, Ramkishen S. & Willett, Thomas D., 2010.
"China as a reserve sink: The evidence from offset and sterilization coefficients,"
Journal of International Money and Finance,
Elsevier, vol. 29(5), pages 951-972, September.
- Alice Y. Ouyang & Ramkishen S. Rajan & Thomas D. Willett, 2007. "China as a Reserve Sink: The Evidence from Offset and Sterilization Coefficients," Working Papers 102007, Hong Kong Institute for Monetary Research.
- Mitsuhiro Fukao, 1990. "Liberalization of Japan's Foreign Exchange Controls and Structural Changes in the Balance of Payments," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 8(2), pages 101-165, September.
- Joshua Aizenman & Reuven Glick, 2009. "Sterilization, Monetary Policy, and Global Financial Integration," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 777-801, 09.
- Joshua Aizenman & Reuven Glick, 2008. "Sterilization, monetary policy, and global financial integration," Working Paper Series 2008-15, Federal Reserve Bank of San Francisco.
- Joshua Aizenman & Reuven Glick, 2008. "Sterilization, Monetary Policy, and Global Financial Integration," NBER Working Papers 13902, National Bureau of Economic Research, Inc.
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