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Financial system reforms and China's monetary policy framework: A DSGE-based assessment of initiatives and proposals

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  • Funke, Michael
  • Paetz, Michael

Abstract

This paper evaluates various financial system reform initiatives and proposals in China in a DSGE modelling setting. The key reform steps analysed include phasing out benchmark interest rates, deepening the direct finance market, reducing government's quantity-based intervention on financial institutions. Our counterfactual model simulation results suggest that the reforms will be beneficial only, if Chinese monetary policy continues to rely on quantity-based interventions on financial institutions or tightens the interest rate rule.

Suggested Citation

  • Funke, Michael & Paetz, Michael, 2012. "Financial system reforms and China's monetary policy framework: A DSGE-based assessment of initiatives and proposals," BOFIT Discussion Papers 30/2012, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2012_030
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    References listed on IDEAS

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    1. Cho, Yujeong & He, Yintao & Huang, Yiping & Wang, Jieru & Yu, Changhua, 2025. "Exchange rate regime and optimal policy: The case of China," Journal of International Money and Finance, Elsevier, vol. 152(C).

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    Keywords

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    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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