Impact of asset price fluctuation on China’s monetary policy: An empirical analysis based on quarterly data, 1994–2006

Jin-wen, Zhao; Hui, Gao

doi:10.1007/s11459-010-0004-5

Cited by 7 publications

(4 citation statements)

References 18 publications

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“…The results in Table 3 show that the estimation results based on the linear trend filter, the quadratic trend filter, the HP filter, the BK filter, and the BP filter methods are almost the same. The nominal interest rates change with the inflation gap significantly but do not change with the output gap, which is consistent with previous research on China's central bank monetary policy rule [27][28][29][30][31]. The above test results contradict the five monetary policy objectives of China's central bank, namely price stability, full employment, economic growth, a balance of payments, and financial stability.…”

Section: The Linear Taylor Rulesupporting

confidence: 89%

“…Although many Chinese scholars have conducted empirical research based on the linear Taylor rule, the majority of the literature [27][28][29][30][31] shows no evidence that China's central bank adjusted the nominal interest against the output gap. Zhang and Liu [32] tried to explain the reason for this phenomenon, and they argued that China's central bank does not measure and publish the data of the output gap; thus, due to a lack of data, it cannot adjust the nominal interest against the output gap.…”

Section: Introductionmentioning

confidence: 99%

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The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

Zhang

Pan

2019

Sustainability

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Although a large number of scholars have studied the policy preferences and monetary policy rules of China's central bank, most have found no evidence that China's central bank has adjusted the nominal interest rates against the output gap. By constructing the pseudo output gap defined by the deviation of the real output growth rate and the target growth rate, this paper finds that China's central bank prefers to adjust the nominal interest rates against the pseudo output gap. The monetary policy preferences and rules of China's central bank in different interest rate regimes are investigated based on the threshold Taylor rule model. It is found that, in the high-interest-rate regime, the central bank adjusts the nominal interest against the inflation gap and the pseudo output gap, while in the low-interest-rate regime, there is no evidence that the central bank adjusts the nominal interest rates against the pseudo output gap. The lower bound of interest rate reduction and the weakening of interest rate policy effects caused by the liquidity trap of the interest rate are the possible reasons for China's central bank not to adjust the nominal interest rates against the pseudo output gap.

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Section: The Linear Taylor Rulesupporting

confidence: 89%

Section: Introductionmentioning

confidence: 99%

The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

Zhang

Pan

2019

Sustainability

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“…Lambertini et al and Notarpietro and Siviero show that monetary policy that considers asset prices and credit can improve the implementation effectiveness of monetary policy (Lambertini et al, 2011;Notarpietro and Siviero, 2015). Similar conclusions have been obtained by scholars in China (Zhao and Gao, 2009;Li and Ma, 2010;Koivu, 2012;Chen et al, 2013;Xiao et al, 2013). Domestic scholars Yang and Lang that the asset price of monetary policy can smooth out the fluctuations in the bubble and stabilize the economy (Gilchrist and Leahy, 2002;Yang and Lang, 2022).…”

Section: Introductionsupporting

confidence: 53%

Interaction Effects of Macroprudential and Monetary Policies in China: An Empirical Analysis Based on a DSGE Model

Gao,

Cheng,

Cheng

et al. 2024

Preprint

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[Introduction]: In the contemporary international financial environment, marked by intricate complexities and increasing uncertainties, the impact of exchange rate fluctuations on national economies has become increasingly significant. In this context, this study uses the Chinese economy as a case study to delve deeply into the interaction effects between macroprudential and monetary policies, analyzing how these policies jointly address economic instability. The aim is to offer new perspectives and strategies for stabilizing the global economic and financial landscape. [Methods]: This paper constructs an open-economy Dynamic Stochastic General Equilibrium (DSGE) model specifically tailored for China, incorporating Bayesian estimation and numerical simulation techniques. The study meticulously examines how macroprudential and monetary policies can be coordinated to achieve economic stability in response to exchange rate shocks. [Results]: The research finds that (1) targeted coordination of macroprudential and monetary policies towards asset prices and price levels can maintain stability under exchange rate shocks; (2) the effective implementation of such coordinated policies not only mitigates the fluctuations in asset prices due to exchange rate shocks but also enhances the level of societal welfare; (3) in terms of choosing an exchange rate regime, a managed floating rate system can prevent policy overlaps and conflicts that might occur in a floating rate system during the coordination of macroprudential and monetary policies, thus offering comparative advantages. [Discussion]: The findings underscore the importance of policy integration in a dynamic and complex global economic environment. They provide policy recommendations for China and other emerging market countries on how to effectively maintain economic stability through the synergistic interplay of macroprudential and monetary policies amid fluctuations in exchange rates and asset prices.

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“…13. Zhao and Gao [26] advocate an even more widespread adoption of this approach encompassing housing prices as well as share prices.…”

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confidence: 99%

Bank Lending, Inflation, and China′s Stock Market (2004–2010)

Burdekin

Tao

2011

Economics Research International

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The 2009 surge in bank lending in China was accompanied by allegations of substantial funds being funneled into the nation's stock and property markets. This paper uses 2004–2010 People's Bank survey data to examine the possible linkages between banking activity and the stock market as well as the associated inflation risks. In general, stock market strength in China seems to be accompanied by rising inflationary concerns, increased bank lending activity, and reduced banker confidence that stable conditions will be maintained. This suggests that the Shanghai market could serve as a useful indicator variable for Chinese monetary policy.

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Impact of asset price fluctuation on China’s monetary policy: An empirical analysis based on quarterly data, 1994–2006

Cited by 7 publications

References 18 publications

The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

The Dependence of China’s Monetary Policy Rules on Interest Rate Regimes: Empirical Analysis Based on a Pseudo Output Gap

Interaction Effects of Macroprudential and Monetary Policies in China: An Empirical Analysis Based on a DSGE Model

Bank Lending, Inflation, and China′s Stock Market (2004–2010)

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