Monetary Policy Transmission and Policy Coordination in China

Author: Song Wenting and Das Sonali

Volume/Issue: Volume 2022 Issue 074

Publication date: April 2022

ISBN: 9798400207235

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Topics covered in this book

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Banks and Banking , Economics- Macroeconomics , Money and Monetary Policy , Public Finance , Economics / General , monetary policy , monetary fiscal coordination , textual analysis , China , monetary policy transmission , monetary policy measure , monetary policy pass-through , pass-through to interest rates , monetary policy shock , fiscal policy measure , Yield curve , Central bank policy rate , Monetary policy instruments , Deposit rates

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Summary

We study the transmission of conventional monetary policy in China, focusing on the interaction between monetary and fiscal policy given the unique institutional set-up for macroeconomic policy making. Our results suggest some progress but also continued difficulties in the transmission of monetary policy. Similar to recent studies, we find evidence of monetary policy pass-through to interest rates. However, the impact of monetary policy measures that are not coordinated with fiscal policy is significantly weaker than that of coordinated measures. This suggests the need for further improvements to the interest-rate based framework.