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Can you hear me now? Identifying the effect of Chinese monetary policy announcements

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  • Shieh, Harrison

Abstract

Do Chinese monetary policy announcements matter? This study evaluates how relevant Chinese monetary policy announcements are to Chinese financial markets and the real side of the economy. Chinese monetary policy is identified by estimating a “target” factor measuring policy surprises and a “path” factor measuring future expectations of policy using price changes to Chinese financial derivatives on policy announcement dates. Local projection results show that 1) Chinese Treasury yields and interbank rates respond persistently, suggesting that policy transmission through an interest-rate channel exists; 2) Equities and exchange rates do not respond to policy announcements instantaneously, but with a lag; 3) Future expectations of Chinese monetary policy play a larger role than surprises, 4) Real variables show evidence of policy transmission, and 5) policy transmission may be sticky due to information frictions.

Suggested Citation

  • Shieh, Harrison, 2024. "Can you hear me now? Identifying the effect of Chinese monetary policy announcements," Journal of International Money and Finance, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:jimfin:v:144:y:2024:i:c:s0261560624000652
    DOI: 10.1016/j.jimonfin.2024.103078
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    Keywords

    Monetary policy; Monetary policy factors; High-frequency identification; Local projection; Chinese economy;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • G0 - Financial Economics - - General

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