To Guide or Not to Guide? Quantitative Monetary Policy Tools and Macroeconomic Dynamics in China

Chen, Hongyi; Funke, Michael; Lozev, Ivan; Tsang, Andrew

doi:10.2139/ssrn.2925156

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To Guide or Not to Guide? Quantitative Monetary Policy Tools and Macroeconomic Dynamics in China

BOFIT Discussion Paper No. 3/2017

45 Pages Posted: 2 Mar 2017 Last revised: 12 Jan 2021

See all articles by Hongyi Chen

Hongyi Chen

Hong Kong Monetary Authority - Hong Kong Institute for Monetary Research (HKIMR)

Michael Funke

University of Hamburg - Department of Economics; Tallinn University of Technology (TUT)

Ivan Lozev

University of Hamburg - Department of Economics

Andrew Tsang

ASEAN+3 Macroeconomic Research (AMRO)

There are 2 versions of this paper

Date Written: February 27, 2017

Abstract

This paper discusses the macroeconomic effects of China’s informal banking regulatory tool “win-dow guidance,” introduced in 1998. Using an open-economy DSGE model that includes the com-mercial banking sector, we study the stabilizing effects of this non-standard quantitative monetary policy tool and the implications of quantity-based vs. price-based monetary policy instruments for welfare. The analyses are relevant to the current overhaul of Chinese monetary policy.

JEL Classification: C61, E32, E44, E52

Suggested Citation: Suggested Citation

Chen, Hongyi and Funke, Michael and Lozev, Ivan and Tsang, Andrew, To Guide or Not to Guide? Quantitative Monetary Policy Tools and Macroeconomic Dynamics in China (February 27, 2017). BOFIT Discussion Paper No. 3/2017, Available at SSRN: https://ssrn.com/abstract=2925156 or http://dx.doi.org/10.2139/ssrn.2925156