China's monetary sterilization and it's economical relationship with the European Union
The author examines China’s monetary policy in the light of the sterilization process of the excess liquidity caused by the permanent foreign exchange rate intervention. The tools of the neutralization of the monetary oversupply, its effectiveness and its costs are also investigated. With the help of Two-stage least squares (2SLS) regression method it is demonstrated that the sterilization process of the yuan has been almost a total success on the level of the monetary base, and has been partially effective on the level of the M2 supply in the past 15 years. With a cost-benefit analysis it is highlighted that the practice of the monetary sterilization – which is thought to be loss-making in the literature – has been a profitable operation of the central bank up to date. After the demonstration of the monetary sterilization, the economic relationship between China and the European Union is investigated. It is pointed out that China’s role as a global importer and a global investor has been significantly appreciated. Thanks to China’s active economic presence in the European market during the crisis, the recession of the European economies were probably much moderate.
|Date of creation:||2012|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Ayhan Kose & Kenneth Rogoff & Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries; Some Empirical Evidence," IMF Occasional Papers 220, International Monetary Fund.
- Brissimis, Sophocles N & Gibson, Heather D & Tsakalotos, Euclid, 2002.
"A Unifying Framework for Analysing Offsetting Capital Flows and Sterilization: Germany and the ERM,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 7(1), pages 63-78, January.
- Brissimis, S.N. & Gibson, H.D. & Tsakalotos, E., 1997. "A Unifying Framework for Analysing Offsetting Capital Flows and Sterilisation," DEOS Working Papers 97-06, Athens University of Economics and Business.
- Brissimis, S.N. & Gibson, H.D. & Tsakalotos, E., 1997. "A Unifying Framework for Analysing Offsetting Capital Flows and Sterilisation," Athens University of Economics and Business 97-06, Athens University of Economics and Business, Department of International and European Economic Studies.
- Árvai, Zsófia, 1995. "A kötelező tartalékráta szabályozásának átalakulása
[Changes in the regulation of the obligatory reserve rate of banks]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(2), pages 201-214.
- Ronald McKinnon & Gunther Schnabl, 2012. "China and Its Dollar Exchange Rate: A Worldwide Stabilising Influence?," The World Economy, Wiley Blackwell, vol. 35(6), pages 667-693, 06.
- Ronald Ian McKinnon & Gunther Schnabl, 2011. "China and its Dollar Exchange Rate: A Worldwide Stabilizing Influence?," CESifo Working Paper Series 3449, CESifo Group Munich.
- Marvin Goodfriend & Eswar Prasad, 2009. "A Framework for Independent Monetary Policy in China," Chapters,in: Monetary Policy Frameworks for Emerging Markets, chapter 8 Edward Elgar Publishing.
- Marvin Goodfriend & Eswar Prasad, 2007. "A Framework for Independent Monetary Policy in China," CESifo Economic Studies, CESifo, vol. 53(1), pages 2-41, March.
- Marvin S Goodfriend & Eswar S Prasad, 2006. "A Framework for Independent Monetary Policy in China," IMF Working Papers 06/111, International Monetary Fund.
- 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.
- 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.
- Guonan Ma & RobertN McCauley, 2008. "Efficacy Of China'S Capital Controls: Evidence From Price And Flow Data," Pacific Economic Review, Wiley Blackwell, vol. 13(1), pages 104-123, 02.
- Woochan Kim, 2003. "Does Capital Account Liberalization Discipline Budget Deficit?," Review of International Economics, Wiley Blackwell, vol. 11(5), pages 830-844, November.
- William R. Cline & John Williamson, 2009. "2009 Estimates of Fundamental Equilibrium Exchange Rates," Policy Briefs PB09-10, Peterson Institute for International Economics. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:40362. 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: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.