China: Strengthening Monetary Policy Implementation

53 Pages Posted: 29 Jan 2007

See all articles by Rodolfo Maino

Rodolfo Maino

International Monetary Fund (IMF)

Bernard Laurens

International Monetary Fund (IMF) - Monetary and Foreign Exchange Operations Division

Date Written: Janurary 2007

Abstract

The People's Bank of China (PBC) has made great strides in modernizing its monetary policy frameworks but their effectiveness will diminish as the sophistication of the economy increases. Empirical evidence supports maintaining a reference to money in China's monetary strategy and enhancing the role of interest rates in its conduct. We advocate adoption of an eclectic strategy involving the monitoring of several indicators, and of a short-term interest rate as the operational target. The PBC should be granted discretion to change its policy rate, and there are no technical obstacles for such a move to occur in the near future.

Keywords: Monetary policy, money demand, multipliers, monetary policy instruments

JEL Classification: E42, E52, E58

Suggested Citation

Maino, Rodolfo and Laurens, Bernard J., China: Strengthening Monetary Policy Implementation (Janurary 2007). IMF Working Paper No. 07/14, Available at SSRN: https://ssrn.com/abstract=959761

Rodolfo Maino (Contact Author)

International Monetary Fund (IMF) ( email )

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

Bernard J. Laurens

International Monetary Fund (IMF) - Monetary and Foreign Exchange Operations Division ( email )

Monetary and Capital Markets Department
700 19th Street NW
Washington, DC 20431
United States

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