Monetary policy based on nonlinear quantity rule: Evidence from China

Yong, Ma

doi:10.1016/j.iref.2014.07.007

Cited by 16 publications

(7 citation statements)

References 38 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Because most of the priors that we use are standard in the literature (e.g. Smets and Wouters, , ; Lubik and Schorfheide, ; Ma, ), here we only focus on the parameters that relate to the policy rules, which is a main focus of the paper. For monetary policy priors, we choose a beta distribution with prior mean 0.75 and standard error 0.1 for the interest rate smoothing parameters ( ρ r and

ρ_{r}^{*}

).…”

Section: Estimation Resultsmentioning

confidence: 99%

Policy Shocks and Macroeconomic Fluctuations in a Two‐country Dynamic Stochastic General Equilibrium Model: Evidence from China*

Yong

2016

Asian Economic Journal

Self Cite

View full text Add to dashboard Cite

In this paper, we construct a two-country dynamic stochastic general equilibrium model to investigate the sources of business cycles in China and the contributions of policy shocks in economic fluctuations. The empirical results from Bayesian estimation show that, apart from the traditional supply and demand shocks, monetary and fiscal policy shocks also play important roles in determining China's economic fluctuations. In addition, we find significant feedback effects between monetary and fiscal policies in China, indicating that policy coordination is an important feature of China's monetary and fiscal policies. Overall, these results not only shed new light on the policy factors behind China's economic fluctuations, but also provide new evidence that is helpful for understanding the policy transmission mechanisms in China.

show abstract

ρ_{r}^{*}

).…”

Section: Estimation Resultsmentioning

confidence: 99%

Policy Shocks and Macroeconomic Fluctuations in a Two‐country Dynamic Stochastic General Equilibrium Model: Evidence from China*

Yong

2016

Asian Economic Journal

Self Cite

View full text Add to dashboard Cite

show abstract

“…As pointed out by Ma (2014), it is typical for emerging economies to experience structural change during periods of financial and economic reform which will ultimately lead to regime changes in monetary policy. Most of the literature in this area has focused on nonlinear price rules or quantity rules but very few have examined nonlinearities in the context of a calculated monetary policy index which replicates the monetary stance of a central bank With these arguments in mind this paper models an augmented Taylor rule as the linear benchmark as;…”

Section: Methodsmentioning

confidence: 99%

“…They find that in the first regime, the PBOC targets inflation, but does not focuses on the output gap; while in the second regime the central bank targets the output gap and the policy rule is not characterised by a stable framework. Based on the relatively scarce literature, Ma (2014) has pointed out that there are major gaps waiting to be filled in the study of China's monetary policy. For example, the author mentions the existing studies that investigate China's monetary policy have implicitly assumed a price rule, especially a Taylor-type interest rate rule.…”

Section: Literature Reviewmentioning

confidence: 99%

Examining monetary policy reaction in the People’s Republic of China – a Markov switching policy index approach

Egan

Leddin

2016

Journal of Chinese Economic and Business Studies

View full text Add to dashboard Cite

This paper estimates a monetary policy rule for the People's Republic of China (PRC) using a standard OLS estimation and a Markov switching model. As the People's Bank of China (PBOC) generally uses a battery of instruments in the conduct of its monetary policy, these models are estimated using a constructed monetary policy index (MPI) in place of the traditional interest rate.This allows for a better understanding of the role the PBOC has played in the PRC's unprecedented economic growth and its relatively low inflation over the last twenty years. This paper will not only examine the unique characteristics of Chinese monetary policy but may also give a more general insight into the dynamics of monetary policy reactions in other emerging markets and economies in transition.

show abstract

“…In general, previous evidence suggests that linear models may be misspecified and that the time-varying predictive content of financial variables should be considered when forecasting economic activity. Moreover, with the presence of the financial crises and changes in economic conditions, nonlinearity issues are repeatedly important because economic variables tend to behave differently during periods of economic turbulence (Clements, Franses & Swansson, 2004;Hamilton, 2005) or in the case of changes in government policies (Sim & Zha, 2006;Ma, 2014). The previous literature indicates that the ability of financial variables to predict GDP growth appears to be largely coincidental, at least in the context of the main industrial countries (e.g., Stock & Watson, 2003;Binswanger, 2004).…”

Section: Figuresmentioning

confidence: 99%

Financial variables and economic activity in the Nordic countries

Kuosmanen

Nabulsi

Vataja

2015

International Review of Economics & Finance

View full text Add to dashboard Cite

Kuosmanen, Petri 1 , Nasib Nabulsi 2 & Juuso Vataja (2014). Financial Variables and Economic Activity in the Nordic Countries. University of Vaasa, Department of Economics, Working Papers 23, 29 p. The recent financial crisis has re-highlighted the importance of clarifying the predictive association between financial markets and the real economy. The previous literature suggests that the predictive ability of financial variables for economic growth appears to be largely coincidental for the main industrial countries. This study focuses on similar small open economies in the Nordic context. More specifically, we study the predictive content of stock returns, short-term interest rates and the term spread by using linear models and non-linear regime switching models for forecasting GDP growth in Denmark, Finland, Norway and Sweden. We apply the threshold autoregressive (TAR) model-switching approach and the novel regime-switching signals which combine the inversion of the yield curve and the recession as the signal to switch between economic states. The predictive ability of the observable and known switching approach is compared to the latent switch under the Markov switching approach. The results suggest that the TAR model approach with an inversion-recession signal is preferable for predicting economic activity in all four of the Nordic countries. However, the predictive ability of financial variables may differ between neighboring countries, although the Nordic countries are similar in terms of economic development and financial institutions. Moreover, the link between the financial sector and GDP growth may not depend straightforwardly on monetary regimes. Among the Nordic countries, the predictive relationship between financial variables and economic activity is found to be the strongest in Finland and Sweden.

show abstract

Monetary policy based on nonlinear quantity rule: Evidence from China

Cited by 16 publications

References 38 publications

Policy Shocks and Macroeconomic Fluctuations in a Two‐country Dynamic Stochastic General Equilibrium Model: Evidence from China*

Policy Shocks and Macroeconomic Fluctuations in a Two‐country Dynamic Stochastic General Equilibrium Model: Evidence from China*

Examining monetary policy reaction in the People’s Republic of China – a Markov switching policy index approach

Financial variables and economic activity in the Nordic countries

Contact Info

Product

Resources

About