Chinese Monetary Policy and the Dollar Peg
This paper investigates to what extent Chinese monetary policy is constrained by the dollar peg. To this end, we use a cointegration framework to examine whether Chinese interest rates are driven by the Fed’s policy. In a second step, we estimate a monetary model for China, in which we include also other monetary policy tools besides the central bank interest rate, namely reserve requirement ratios and open market operations. Our results suggest China has been relatively successful in isolating its monetary policy from the US policy and that the interest rate tool has not been effectively made use of. We therefore conclude that by employing capital controls and relying on other instruments than the interest rate China has been able to exert relatively autonomous monetary policy.
|Date of creation:||2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.socialpolitik.org/|
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.:
- Guillermo A. Calvo & Carmen M. Reinhart, 2002.
"Fear of Floating,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 117(2), pages 379-408.
- Reade, J. James & Volz, Ulrich, 2011.
"Leader of the pack? German monetary dominance in Europe prior to EMU,"
Elsevier, vol. 28(1), pages 239-250.
- Reade, J. James & Volz, Ulrich, 2011. "Leader of the pack? German monetary dominance in Europe prior to EMU," Economic Modelling, Elsevier, vol. 28(1-2), pages 239-250, January.
- J. James Reade & Ulrich Volz, 2009. "Leader of the Pack? German Monetary Dominance in Europe Prior to EMU," Economics Series Working Papers 419, University of Oxford, Department of Economics.
- Michael Geiger, 2008. "Instruments Of Monetary Policy In China And Their Effectiveness: 1994–2006," UNCTAD Discussion Papers 187, United Nations Conference on Trade and Development.
- Hali Edison & Ronald MacDonald, 2003. "Credibility and Interest Rate Discretion in the ERM," Open Economies Review, Springer, vol. 14(4), pages 351-368, October.
- Ivan Roberts & Rod Tyers, 2003. "China's Exchange Rate Policy: The Case for Greater Flexibility," Asian Economic Journal, East Asian Economic Association, vol. 17(2), pages 155-184, 06.
- Engle, Robert F & Granger, Clive W J, 1987.
"Co-integration and Error Correction: Representation, Estimation, and Testing,"
Econometric Society, vol. 55(2), pages 251-76, March.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Koivu, Tuuli & Mehrotra, Aaron & Nuutilainen, Riikka, 2008. "McCallum rule and Chinese monetary policy," BOFIT Discussion Papers 15/2008, Bank of Finland, Institute for Economies in Transition.
- Mehrotra, Aaron, 2005.
"Exchange and interest rate channels during a deflationary era : evidence from Japan, Hong Kong and China,"
BOFIT Discussion Papers
17/2005, Bank of Finland, Institute for Economies in Transition.
- Mehrotra, Aaron N., 2007. "Exchange and interest rate channels during a deflationary era--Evidence from Japan, Hong Kong and China," Journal of Comparative Economics, Elsevier, vol. 35(1), pages 188-210, March.
- Hendry, David F. & Massmann, Michael, 2007. "Co-Breaking: Recent Advances and a Synopsis of the Literature," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 33-51, January.
When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc11:48740. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.