China's monetary policy and the exchange rate created by

By:

Mehrotra, Aaron [author]

Contributor(s):

Sánchez-Fung, José R [co-author]

Material type: Text

TextSeries: Comparative economic studies ; Volume 52, number 4Basingstoke: Palgrave Macmillan, 2010Content type:

text

Media type:

unmediated

Carrier type:

volume

ISSN:

08887233

Subject(s):

Exchange rate -- Taylor rule -- Inflation expectations -- China

LOC classification:

HB90 COM

Online resources:

Click here to access online

Abstract: The paper models monetary policy in China using a hybrid McCallum–Taylor empirical reaction function. The feedback rule allows for reactions to inflation and output gaps, and to developments in a trade-weighted exchange rate gap measure. The investigation finds that monetary policy in China has, on average, accommodated inflationary developments. But exchange rate shocks do not significantly affect monetary policy behaviour, and there is no evidence of a structural break in the estimated reaction function at the end of the strict dollar peg in July 2005. The paper also runs an exercise incorporating survey-based inflation expectations into the policy reaction function and meets with some success.

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Holdings
Item type	Current library	Call number	Vol info	Copy number	Status	Notes	Date due	Barcode
Journal Article	Main Library - Special Collections	HB90 COM (Browse shelf(Opens below))	Vol. 52, no. 4 (pages 497-514)	SP6232	Not for loan	For in house use

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The paper models monetary policy in China using a hybrid McCallum–Taylor empirical reaction function. The feedback rule allows for reactions to inflation and output gaps, and to developments in a trade-weighted exchange rate gap measure. The investigation finds that monetary policy in China has, on average, accommodated inflationary developments. But exchange rate shocks do not significantly affect monetary policy behaviour, and there is no evidence of a structural break in the estimated reaction function at the end of the strict dollar peg in July 2005. The paper also runs an exercise incorporating survey-based inflation expectations into the policy reaction function and meets with some success.

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