Download This PaperMarket and Non-Market Monetary Policy Tools in a Calibrated DSGE Model for Mainland China
37 Pages Posted: 18 Jul 2012
Date Written: July 13, 2012
Abstract
Monetary policy in mainland China differs from conventional central banking in several respects. The central bank regulates retail lending and deposit rates, influences the credit supply via window guidance, and, in recent years has even used the required reserve ratio as a tool for fine-tuning monetary policy. This paper develops a New Keynesian DSGE model to captures China’s unconventional monetary policy toolkit. We find that credit quotas are important as the interest-rate corridor distorts the efficient reactions of the economy. Moreover, for China’s central bankers the choice of a particular monetary policy tool or a the appropriate combination of instruments depends on the source of the shock.
Keywords: DSGE models, monetary policy, China, macroprudential policy
JEL Classification: E42, E52, E58
Suggested Citation: Suggested Citation
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