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

45 Pages Posted: 2 Mar 2017

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; CESifo (Center for Economic Studies and Ifo Institute)

Ivan Lozev

University of Hamburg - Department of Economics

Andrew Tsang

Hong Kong Monetary Authority

Multiple version iconThere 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 “window guidance,” introduced in 1998. Using an open-economy DSGE model that includes the commercial 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

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

Hongyi Chen (Contact Author)

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

3 Garden Road, 8th Floor
Hong Kong
China

Michael Funke

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Ivan Lozev

University of Hamburg - Department of Economics ( email )

Von-Melle-Park 5
room 2128 C rise
Hamburg, 20146
Germany

Andrew Tsang

Hong Kong Monetary Authority ( email )

55/F, Two International Finance Centre
Hong Kong
Hong Kong

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