What Has Driven Chinese Monetary Policy Since 1990? Investigating the People's Bank's Policy Rule

27 Pages Posted: 5 Nov 2005

See all articles by Richard C. K. Burdekin

Richard C. K. Burdekin

Claremont McKenna College - Robert Day School

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs ; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: July 2006

Abstract

Post-1990 Chinese monetary policy is modeled with an augmented McCallum-type rule that takes into account the People's Bank of China's emphasis on targeting the rate of money supply growth. People's Bank policy appears responsive to the gap between target and actual nominal GDP as well as to external pressures. Additional cointegration analysis yields estimates of the gap between estimated money demand and actual money supply that appear to track the inflationary trends evident over our sample period. Chinese inflation and monetary policy outcomes seem reasonably captured using a standard monetary approach, therefore, without the need to appeal to China-specific structural factors.

Keywords: McCallum rule, Inflation, deflation, China

JEL Classification: E31, E41, E42, E58

Suggested Citation

Burdekin, Richard C. K. and Siklos, Pierre L., What Has Driven Chinese Monetary Policy Since 1990? Investigating the People's Bank's Policy Rule (July 2006). Available at SSRN: https://ssrn.com/abstract=837224 or http://dx.doi.org/10.2139/ssrn.837224

Richard C. K. Burdekin

Claremont McKenna College - Robert Day School ( email )

500 E. Ninth St.
Claremont, CA 91711-6400
United States
909-607-2884 (Phone)
909-621-8249 (Fax)

HOME PAGE: http://www.cmc.edu/rdschool

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )