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How Effective is China’s Monetary Policy? An assessment of the link between the growth of monetary aggregates and inflation during the 2000s

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Abstract

The effectiveness of China’s monetary policy hinges on the existence of a robust link between the growth of monetary aggregates and inflation. This paper considers this link during the 2000s using Structural VAR models and simulated out-of-sample forecasting techniques. The results indicate that the link is far from robust. Such findings serve to underscore the importance of institutional reforms that will enable interest rates to play a more prominent role as an instrument of monetary policy.

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  • James S Laurenceson & Callan Windsor, 2011. "How Effective is China’s Monetary Policy? An assessment of the link between the growth of monetary aggregates and inflation during the 2000s," Discussion Papers Series 435, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:435
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