China's Monetary Policy Communication: Frameworks, Impact, and Recommendations

33 Pages Posted: 13 Feb 2019

See all articles by Michael McMahon

Michael McMahon

University of Oxford

Alfred Schipke

International Monetary Fund (IMF)

Xiang Li

Halle Institute for Economic Research

Date Written: November 2018

Abstract

Financial markets are eager for any signal of monetary policy from the People's Bank of China (PBC). The importance of effective monetary policy communication will only increase as China continues to liberalize its financial system and open its economy. This paper discusses the country's unique institutional setup and empirically analyzes the impact on financial markets of the PBC's main communication channels, including a novel communication channel. The results suggest that there has been significant progress but that PBC communication is still evolving toward the level of other major economies. The paper recommends medium-term policy reforms and reforms that can be adopted quickly.

Keywords: Monetary policy, Financial markets, Monetary transmission mechanism, Central banks and their policies, People’;s Bank of China, Communication, Central Bank, Monetary Policy Transmission, People;’s Bank of China, Monetary Policy (Targets, Instruments, and Effects), General

JEL Classification: E58, E52, E40

Suggested Citation

McMahon, Michael and Schipke, Alfred and Li, Xiang, China's Monetary Policy Communication: Frameworks, Impact, and Recommendations (November 2018). IMF Working Paper No. 18/244, Available at SSRN: https://ssrn.com/abstract=3333719

Michael McMahon (Contact Author)

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Alfred Schipke

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Xiang Li

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

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