The Transition to Marked-Based Monetary Policy: What Can China Learn from the European Experience?
We discuss the prospects for Chinese money market development and transition to market-based monetary policy operations based on a comparative historical analysis of the present Chinese situation and the development in 11 European countries from 1979 up to the launch of European Economic and Monetary Union (EMU). Central banks in the latter group typically had an incentive to encourage the formation of efficient benchmark segments in the domestic money markets for the conduct of open market operations as traditional quantity-oriented instruments became increasingly ineffective. China is displaying many of the same symptoms as the European countries in the 1970s and 1980s, including poor monetary transmission due to excess liquidity and conflicts of interest due to unclear priority among multiple policy goals. We conclude that the current Chinese multiple-target monetary policy is counter-productive to efforts to develop an efficient money market that can serve as arena for an effective market-based monetary policy.
|Date of creation:||06 Feb 2007|
|Date of revision:|
|Publication status:||Published in Journal of Asian Economics, 2007, pages 257-283.|
|Contact details of provider:|| Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden|
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Charles A. E. Goodhart & Jose Vinals, 1994. "Strategy an tactics of monetary policy: examples from Europe and the Antipodes," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 38, pages 139-194.
- Catharina J. Hooyman, 1994. "The Use of Foreign Exchange Swaps by Central Banks," IMF Staff Papers, Palgrave Macmillan, vol. 41(1), pages 149-162, March.
- Shang-Jin Wei & Eswar S Prasad, 2005.
"The Chinese Approach to Capital Inflows; Patterns and Possible Explanations,"
IMF Working Papers
05/79, International Monetary Fund.
- Eswar Prasad & Shang-Jin Wei, 2007. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 421-480 National Bureau of Economic Research, Inc.
- Eswar Prasad & Shang-Jin Wei, 2005. "The Chinese Approach to Capital Inflows: Patterns and Possible Explanations," NBER Working Papers 11306, National Bureau of Economic Research, Inc.
- Malcolm Edey & Ketil Hviding, 1995. "An Assessment of Financial Reform in OECD Countries," OECD Economics Department Working Papers 154, OECD Publishing.
- Richard W. Kopcke, 2002. "The practice of central banking in other industrialized countries," New England Economic Review, Federal Reserve Bank of Boston, issue Q 2, pages 3-9.
- Ben Bernanke & Frederic Mishkin, 1992.
"Central Bank Behavior and the Strategy of Monetary Policy: Observations from Six Industrialized Countries,"
in: NBER Macroeconomics Annual 1992, Volume 7, pages 183-238
National Bureau of Economic Research, Inc.
- Ben Bernanke & Frederic Mishkin, 1992. "Central Bank Behavior and the Strategy of Monetary Policy: Observations From Six Industrialized Countries," NBER Working Papers 4082, National Bureau of Economic Research, Inc.
- Charles Goodhart & José Viñals, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," Working Papers 9425, Banco de España;Working Papers Homepage.
- Ping, Xie & Xiaopu, Zhang, 2003. "The coordination between monetary policy and exchange rate policy in an open economy in transition: A case study on China from 1994 to 2000," Journal of Asian Economics, Elsevier, vol. 14(2), pages 327-336, April.
- Li-Gang Liu, 2005. "The Impact of Financial Services Trade Liberalization on China," Discussion papers 05024, Research Institute of Economy, Trade and Industry (RIETI).
- Bruce Kasman, 1992. "A comparison of monetary policy operating procedures in six industrial countries," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 5-24.
- Park, Albert & Sehrt, Kaja, 2001.
"Tests of Financial Intermediation and Banking Reform in China,"
Journal of Comparative Economics,
Elsevier, vol. 29(4), pages 608-644, December.
- Albert Park and Kaja Sehrt & Albert Park and Kaja Sehrt, 1999. "Tests of Financial Intermediation and Banking Reform in China," William Davidson Institute Working Papers Series 270, William Davidson Institute at the University of Michigan.
- International Monetary Fund, 1998. "Structural Reforms in Government Bond Markets," IMF Working Papers 98/108, International Monetary Fund.
- Bank for International Settlements, 2003. "China's capital account liberalisation: international perspective," BIS Papers, Bank for International Settlements, number 15.
- Joseph Bisignano, 1996. "Varieties of monetary operating procedures: balancing monetary objectives with market efficiency," BIS Working Papers 35, Bank for International Settlements.
- Eswar S Prasad & Qing Wang & Thomas Rumbaugh, 2005. "Putting the Cart Before the Horse? Capital Account Liberalization and Exchange Rate Flexibility in China," IMF Policy Discussion Papers 05/1, International Monetary Fund.
- Morris Goldstein, 2004. "Adjusting China's Exchange Rate Policies," Working Paper Series WP04-1, Peterson Institute for International Economics.
- Aspetsberger, A., 1996. "Open Market Operations in EU Countries," Papers 3, European Monetary Institute.
- Bank for International Settlements, 2001. "Comparing monetary policy operating procedures across the United States, Japan and the euro area," BIS Papers, Bank for International Settlements, number 09.
- Javier Santillán & Marc Bayle & Christian Thygesen, 2000. "The impact of the euro on money and bond markets," Occasional Paper Series 1, European Central Bank.
- Bank for International Settlements, 2005. "Globalisation and monetary policy in emerging markets," BIS Papers, Bank for International Settlements, number 23.
- Wyplosz, Charles, 1999. "Financial Restraints and Liberalization in Postwar Europe," CEPR Discussion Papers 2253, C.E.P.R. Discussion Papers.
- José Viñals & Charles Goodhart, 1994. "Strategy and Tactics of Monetary Policy: Examples from Europe and the Antipodes," FMG Special Papers sp61, Financial Markets Group.
- Bank for International Settlements, 1999. "Implications of repo markets for central banks," CGFS Papers, Bank for International Settlements, number 10.
- Robert Litan & William Isaac & William Taylor, 1994. "Financial Regulation," NBER Chapters, in: American Economic Policy in the 1980s, pages 519-572 National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:hhs:iuiwop:0696. 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: (Elisabeth Gustafsson)
If references are entirely missing, you can add them using this form.