BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 16/2012:
Market and Non-Market Monetary Policy Tools in a Calibrated DSGE Model for Mainland China
Qianying Chen ()
, Michael Funke and Michael Paetz
Abstract: Monetary policy in mainland China differs from
conventional central banking in several respects. The central bank
regulates retail lending and deposit rates, influences the credit supply
via window guidance, and, in recent years has even used the required
reserve ratio as a tool for fine-tuning monetary policy. This paper
develops a New Keynesian DSGE model to captures China’s unconventional
monetary policy toolkit. We find that credit quotas are important as the
interest-rate corridor distorts the efficient reactions of the economy.
Moreover, for China’s central bankers the choice of a particular monetary
policy tool or a the appropriate combination of instruments depends on the
source of the shock.
Keywords: DSGE models; monetary policy; China; macroprudential policy; (follow links to similar papers)
JEL-Codes: E42; E52; E58; (follow links to similar papers)
37 pages, July 13, 2012
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