The People's Bank of China's response to the coronavirus pandemic - A quantitative assessment

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Title: The People's Bank of China's response to the coronavirus pandemic - A quantitative assessment
ISBN: 978-952-323-331-7
Author: Funke, Michael ; Tsang, Andrew
Organization: Bank of Finland
Department / Unit: Institute for Economies in Transition (BOFIT)
Series: BOFIT Discussion Papers
ISSN: 1456-5889
Series year: 2020
Series number: 12/2020
Year of publication: 2020
Publication date: 31.5.2020
Pages: 27
Subject (yso): rahapolitiikka; pandemiat
Keywords: Bofit-kokoelma; COVID-19; Kiina; koronakriisi
JEL: C54; E32; E52; I15
Other keywords: China; corona pandemic; COVID-19; monetary policy; dynamic factor model; People’s Bank of China
Abstract: The People’s Bank of China (PBoC) has taken numerous measures to cushion the impacts of the COVID-19 health crisis on the Chinese economy. As the current monetary policy framework features a multi-instrument mix of liquidity tools and pricing signals, we employ a dynamic-factor modeling approach to derive an indicator of China’s monetary policy stance. Our approach assumes that comovements of several monetary policy instruments share a common element that can be captured by an underlying unobserved component. We use the derived indicator to trace the response of the PBoC to the coronavirus pandemic. The estimates reveal that the PBoC has implement novel policy measures to ensure that commercial banks maintain liquidity access and credit provision during the COVID-19 crisis.
Table of contents: Abstract .. 4 1 Introduction .. 5 2 The impact of COVID-19 on the Chinese economy .. 7 3 China’s emergency monetary measures to combat corona risks .. 12 4 The proposed dynamic factor model and estimation results .. 15 5 Conclusions .. 22 References .. 23 Appendix .. 26

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