The direction and intensity of China’s monetary policy conduct : A dynamic factor modelling approach

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dc.contributor Bank of Finland
dc.contributor.author Funke, Michael
dc.contributor.author Tsang, Andrew
dc.date.accessioned 2019-04-25T09:21:20Z
dc.date.available 2019-04-25T09:21:20Z
dc.date.issued 2019
dc.identifier.isbn 978-952-323-271-6
dc.identifier.issn 1456-5889
dc.identifier.uri https://helda.helsinki.fi/bof/handle/123456789/16109
dc.description Revised data uploaded on 8th November 2019
dc.description.abstract The recent upgrade of the People’s Bank of China’s monetary policy framework establishes a corridor system of interest rates. As the revamped policy arrangement now features a multiple-instrument mix of liquidity tools and pricing signals, we employ a dynamic factor modelling approach to derive an indicator of China’s monetary policy stance. The approach is based on the notion that comovements in several monetary policy instruments have a common element that can be captured by a single underlying, unobserved component. To clarify and interpret the derived index, we employ a baseline DSGE model that can be solved analytically and allows tracing of the expansionary and contractionary on-and-off phases of Chinese monetary policy.
dc.description.tableofcontents Abstract ..4 1 Introduction ..5 2 The evolution of China’s multiple instrument monetary framework ..6 3 Setup of the dynamic factor model ..9 3.1 Methodology ..9 3.2 Data description and results ..12 3.3 Assessment of the monetary policy stance indicator against various benchmarks ..18 4 Temporal evolution of monetary policy through the lens of a DSGE model ..21 5 Conclusions ..30 References ..32 Appendix A Parameter estimates of dynamic factor model of monetary policy stance indicator ..35 Appendix B Replication of monetary policy shocks described in Kamber and Mohanty (2018) ..36
dc.format.extent 37
dc.language.iso ENG
dc.rights https://helda.helsinki.fi/bof/copyright
dc.subject Bofit-kokoelma
dc.subject SP
dc.subject RP ST
dc.subject Kiina
dc.subject DSGE
dc.subject mallit
dc.subject.other China
dc.subject.other monetary policy stance
dc.subject.other dynamic factor model
dc.subject.other DSGE model
dc.title The direction and intensity of China’s monetary policy conduct : A dynamic factor modelling approach
dc.type Paper
dc.identifier.urn URN:NBN:fi:bof-201904251161
dc.subject.jel C54
dc.subject.jel E52
dc.subject.jel E58
dc.subject.jel E61
dc.subject.jel E32
dc.series.name BOFIT Discussion Papers
dc.series.year 2019
dc.series.number 8/2019
dc.series.sortingnumber 0008
dc.date.publication 24.4.2019
dc.subject.yso rahapolitiikka
dc.contributor.orgunit Institute for Economies in Transition (BOFIT)
bof-internal.includedInCRIS 1
dc.type.okm D4

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