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A study of the time-varying impact of capital account liberalization on monetary policy rules in the open economy: Evidence from China

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  • Yang, Ronghai
  • Sun, Xiaowen
  • Wang, Honglei
  • Wang, Xiao

Abstract

This paper analyses the impact of capital account liberalization on monetary policy rules in an open economy, using a TVP-SV-VAR model. The results of the equal-interval impulse response reveal that the medium and long-term impacts of capital account liberalization shocks on monetary policy rules are more potent than those in the short term. The results of the time-point impulse responses indicate that the impact of capital account liberalization shocks on monetary policy rules in November 2013 shows a significantly stronger effect compared to March 2016. Both the results of the equal-interval and time-point impulse responses consistently indicate that capital account liberalization is more effective in stabilizing quantitative monetary policy rules compared to stabilizing price-based monetary policy rules.

Suggested Citation

  • Yang, Ronghai & Sun, Xiaowen & Wang, Honglei & Wang, Xiao, 2024. "A study of the time-varying impact of capital account liberalization on monetary policy rules in the open economy: Evidence from China," Finance Research Letters, Elsevier, vol. 65(C).
    • Handle: RePEc:eee:finlet:v:65:y:2024:i:c:s1544612324006573
    DOI: 10.1016/j.frl.2024.105627
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    References listed on IDEAS

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    More about this item

    Keywords

    Capital account liberalization; Monetary policy rules; TVP-SV-VAR;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications

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