To Guide or Not to Guide? Quantitative Monetary Policy Tools and Macroeconomic Dynamics in China
45 Pages Posted: 2 Mar 2017 Last revised: 17 Jul 2019
Date Written: February 27, 2017
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.
Keywords: monetary policy, window guidance, China, DSGE model
JEL Classification: C61, E32, E44, E52
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