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ID: 161973

China’s Monetary Policy under the “New Normal” / Kang, Chen

Kang, Chen	Journal Article
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Summary/Abstract

How China’s “new normal” affects the conduct of monetary policy deserves a careful study. The enormous task of economic restructuring, amid conflicting goals, has certainly introduced a new set of challenges to macroeconomic management. This article provides empirical evidence to show that the conduct of China’s monetary policy has indeed changed and become less predictable since 2013. While supply-side structural adjustments significantly decrease local governments’ appetite for investment and create slacks in aggregate demand, macroeconomic policymakers feel compelled to ease off deleveraging pressures when the adjustment pains are considered unbearable. The monetary authority also faces the policy trilemma when the internationalisation of the renminbi requires a strong currency and free flow of capital. Furthermore, the dual-track interest rate system creates speculative capital movements between bank deposits and the money market which complicates the transmission mechanism of monetary policy. Inconsistencies are thus created, and reversals of policy direction are frequently observed.

Key Words

China’s Monetary Policy ; New Normal

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ID: 122990

On international short-term capital movements and China’s monetary policy independence: an empirical analysis / Pinghai, Li; Wei, Lu; Haijian, Li

Pinghai, Li	Journal Article
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2013.

Summary/Abstract

Against the backdrop of the increasing impact of international short-term capital movements in the global economy, China's monetary policy independence has also been affected. This article outlines several important effects of international short-term capital movements on China's monetary policy independence by analysing features of channels and mechanisms of short-term international capital movement. The relationship between international short-term capital movements and China's monetary policy independence is studied econometrically using a value-at-risk model. The findings indicate that such capital influxes, especially those from abnormal channels in huge volumes, do adversely affect China's monetary policy independence.

Key Words

Global Economy ; China ; China's Monetary Policy ; International Short - Term Capital Movements ; China’s Monetary Policy

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