Time-varying transmission efficiency of China’s monetary policy

This paper tries to investigate the time-varying characteristics of China’s monetary policy transmission from the impulse response evidence of both open-economy DSGE model and TVP-VAR model. We find that the transmission efficiency of price-based monetary policy has significantly improved over the sample period, while quantity-based monetary policy is weakening. The resume of exchange reform in 2010 also strengthens the exchange rate channel especially in terms of price-based monetary policy. Combining with the evidence from DSGE model underlines the importance of further interest rate liberalization and price-based monetary policy Taylor rule should also consider the exchange rate stability.     

America’s neglected debt to the Dutch,an institutional perspective

America’s early constitutional development owes a good deal to the experience and policies of the Dutch republic. Many of the parallels are direct: In the late 16th century, the Dutch fought a successful war to secede from a major empire. They wrote a declaration of independence and adopted a federal model of Republican governance almost exactly two hundred years before the Americans. Somewhat later, the Dutch republic and its political institutions subsequently inspired and protected enlightenment scholars. Its leading political family and army played a crucial role in curtailing English absolutism in England and in England’s American colonies, and its federal template provided a model for early American institutions.

Understanding China’s official statistics

In response to the three influential doubts about government statistics, this article expounds the differences between relevant common economic statistical indicators and the national account indicators that reflect demand structure and national income distribution structure. The comparisons include the following aspects: the differences between household consumption expenditure from household survey and from expenditure-based GDP; the differences between total retail sales of consumer goods and final consumption expenditure from expenditure-based GDP; the differences between government expenditure from government fiscal statistics and government consumption expenditure from expenditure-based GDP; the differences between total investment in fixed assets from investment statistics and gross fixed capital formation from expenditure-based GDP; the differences between inventories and change in inventories from expenditure-based GDP; the differences between foreign trade balance from customs statistics and net exports of goods and services from expenditure-based GDP; and the differences between household disposable income from the household survey and from the Flow of Funds Table, etc. In addition, this article answers the questions proposed by the three doubts correspondingly.     

Understanding China’s external imbalances

The paper is intended to provide a comprehensive explanation of China’s external imbalances, which are characterized by current account surplus and financial account surplus. The thrust of the paper is that China’s current account surplus is not simply an effect of the savings gap. Rather, it is a result of complicated interactions among various factors in a dynamic fashion. Hence, to keep the current account surplus-to-GDP ratio at a rational level, the implementation of comprehensive policies that address all relevant factors at the same time as well as fundamental restructuring are necessary.     

Political incentives and the effectiveness of monetary policy: evidence from China’s city commercial banks

From the perspective of official-and-director (OAD), this article takes studies of the effect of monetary policy on bank loans to the heterogeneity of bank. We explore how political incentives affect the lending channel of monetary policy transmission, using a sample of China’s city commercial banks during 2006–2014. And we further analyse the role of OAD’s characteristics, including administrative rank and age. The results indicate that although tight monetary policy can reduce bank loans, the OAD can weaken this relationship, and the higher is the administrative rank of OAD, the larger is the effect. And the older is OAD, the larger is the effect. More importantly, the relationship between monetary policy and bank loan is insignificant in banks with OAD, implying that the lending channel of monetary policy is absent when considering the role of OAD.     

Hayek’s monetary theory and policy: A note on alleged inconsistency

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.     

Circular economy： from an institutional perspective

Circular economy （CE） has been put fonvard as an important environmental and resource strategy in China.Aiming at the high utilization rate of resources and reduction of pollutants,CE means to realize a shift of fundamental paradigm.With the mode of production and consumption from linear to recycling model,the promotion requires transdisciplinary researches which integrate technological,ecological,social-cultural and other sciences.The present study focuses on the implementation of circular economy from an institutional perspective.Institution acts as a crucial factor by providing incentives for technical innovation,leading investment orientation and determining policy effectiveness,etc.This paper mainly discusses about： firstly,the feature of institution,institutional changes and institutional innovation is articulated,together with eco-industrial park strategy,extended producer＇s responsibility and dematerialization principle as innovative institutional arrangements; secondly,as policy plays great role on institutional changing process,the mechanism of policy implementation is needed to be related; as a result,coevolution of institutions and policies is thus presented; at last,a pilot attempt is made to find out some operational avenues in accomplishment of CE through both theoretical and practical methodology,special resolutions are put forward after some projecting difficulties and dilemmas in China are described.     

Understanding China’s Foreign Trade Policy: A Literature Review

China has continued to experience rapid growth in its foreign trade since the implementation of its reform and opening-up policies. In recent years, the country has become the world’s largest exporter and second largest importer of goods and commodities. China’s trade policy has also gradually been transforming from protectionism to open trade. This paper aims to provide a comprehensive survey on the literature of China’s trade policy. The review covers (1) export and import policies, (2) tariff and non-tariff barriers, and (3) policy effects and motivations behind the policy design. This paper also reports on important topics and issues that deserve more research attention.     

South Africa’s monetary policy independence: evidence from a Global New-Keynesian DSGE model

We study the response of South African monetary policy decisions to foreign monetary policy shocks. We estimate the extent of foreign monetary policy pass through by augmenting standard Taylor rules and comparing the results within the context of a Global New-Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. The general equilibrium model captures important spill-over effects that would otherwise have been ignored in a single equation set-up. The results show that the relationship between foreign monetary policy shocks and South African interest rates is complicated – South Africa does not import foreign monetary policy directly, but is still affected. Except for the US, an increase in foreign interest rates leads to a decrease in South African interest rates – highlighting the complex channels that the monetary policy authority has to monitor outside of its economy.     

International spillovers of ECB’s unconventional monetary policy: the effect on Central Europe

We examine how unconventional monetary policy of the European Central Bank (ECB) influences macroeconomic stability in three Central European economies. We estimate various panel vector autoregressions (PVARs) using monthly data from 2008 to 2014. Using the shadow policy rate and central bank assets as measures of unconventional policies, we find that output growth and inflation in Central Europe temporarily increase following an expansionary unconventional monetary policy shock by the ECB. Using both impulse responses and variance decompositions, we find that the effect of unconventional policies on output growth is much stronger than the effect on inflation.     

Malaysia’s current account deficits: an intertemporal optimization perspective

The study examines the account imbalances in Malaysia during the past four decades. Using Sachs’s (National Bureau of Economic Research, Working Paper No. 859, 1982) intertemporal model, we address the issue of external solvency by measuring the deviation of actual from the optimal path of the current account balance. All in all, we found that the actual path moves reasonably close to the estimated consumption-smooth currents accounts, suggesting that the current account balances satisfy the external solvency condition. The major findings from the empirical application of the model revealed the following: (i) the deficits of the 1990s prior to 1997 financial crisis were sustainable; (ii) the evidence appears to suggest that the current account balance broadly follows the same pattern of the intertemporal model and hence suggests that capital is mobile; (iii) the large surpluses observed during the post-1997 period significantly deviate from the optimal path, implying that consumption is unsustainable and is expected to fall in the near future and; (iv) there is excessive volatility in international capital movements for consumption-smoothing purpose.      

Impact of asset price fluctuation on China’s monetary policy: An empirical analysis based on quarterly data, 1994–2006

The strenuous fluctuation in global asset price in recent years has had a profound impact on the economic and social development of every country. An empirical analysis indicates that asset prices (the stock price index and real estate prices) are important endogenous variables affecting the interest rate reaction function of central bank monetary policy. With expected inflation as a given, each one percentage point rise in output gap will cause a 0.79 percentage point reduction in interest rates by the central bank and each one percentage point rise in real estate price will result in a 2.2 percentage point rise in interest rates. The stock price index does have an influence on the trends in monetary policy, but it is less salient than the impact of housing prices. We also show that monetary policy that employs asset price as an endogenous variable increases the central bank’s control in seeking to attain its objectives. Therefore we suggest that the central bank should make asset price fluctuation an endogenous variable and incorporate it into its forward-looking interest rate rule, in order to facilitate the healthy development of China’s markets for real estate, stocks and derivatives, energy and bulk commodities and maintain rapid, smooth, sustainable and harmonious economic development.     

The international spillover of china’s monetary policy: a case study of a developing country

This paper aimed to investigate the evidence on the transmission of China’s monetary policy shocks to macroeconomic variables in Iran. Since 1990, China has become one of the main trading partners of Iran; therefore, it is expected that China’s macroeconomic shocks have some consequences on Iran’s Economy. In this study, a structural vector autoregressive model is used to explore such a transmission. The findings of the study reveal that the China’s monetary policy changes significantly affect the Consumer Price Index (CPI) as Iran’s CPI meaningfully increases with the expansion of China’s money supply. Furthermore, it was found that Iran’s other economic variables, including the real GDP, real effective exchange rate, and interest rate, do not significantly reflect the China’s monetary shocks; even though confirm the expected sign and direction.     

‘Talking down monetary policy’ – a note

There is a recent debate about whether ultra-expansionary monetary policy is no longer effective in stimulating demand, a concern often voiced in the euro area in light of persistently low and even negative inflation. As a response, the European Central Bank (ECB) warns against ‘talking down monetary policy’ (ECB Vice-President Vítor Constâncio, 2016). This note uses a textbook model of optimal monetary policy to study a situation in which the public misperceives the interest rate elasticity of aggregate demand, which reflects policy effectiveness. We show that as a result of underestimating policy effectiveness demand shocks can no longer be stabilized perfectly, thus resulting in inefficient inflation and output dynamics. In the presence of misperceptions, a negative demand shock leads to a prolonged period of negative inflation rates.     

The persistent institutional effect of liberal colonialism: evidence from China’s financial policies

ABSTRACT

The effect of liberal colonialism on the allocation of capital persists to this day. We exploit the colonial history of China during 1896-1911 with qualitative evidence to measure liberal colonialism. We document that liberal colonialism promotes the subsequent efficiency of financial policies on the capital allocation in 2004 through the quality of economic institutions.     

Gender imbalance in China’s marriage migration: Quantitative evidence and policy implications

While gender-imbalanced marriage migration across borders and regions and its socioeconomic impacts have been widely reported in developing nations, this paper reports empirical findings based on data from China since 1980. China’s international marriages were characterized with more than 95% of brides from mainland China in the 1980s but the proportion has dropped gradually to around 60% in recent years. Analysis of China’s census data and a panel dataset from Shanghai suggests that proportionally more women migrated from relatively less-developed to more-developed regions through marriage and the variation in income across regions is the key factor behind the migration pattern. China’s gender-imbalanced marriage migration has caused problems such as male marriage squeeze in poor rural areas and “leftover women” in large cities like Shanghai. Policies for poverty reduction and more balanced economic development across regions are recommended for reducing such gender imbalance and the associated socioeconomic problems.     

China’s direct investment in the European Union: challenges and policy responses

The dramatic rise of Chinese direct investment into the European Union (EU) has sparked a debate about the control that China may be seeking to take over European economies. Quite naturally, these concerns have led to repeated calls that action be taken to slow down, if not to halt entirely, this growing trend. The objective of the article is to shed light on this debate. Following a thorough analysis of Chinese direct investment in the EU, this article suggests that the challenges posed by these inflows are widely overblown. Despite this, the article concludes that it is necessary to have a systematic approach to regulating inbound foreign investment (including from China) in the EU. Such an approach may help guard against the risk of a protectionist drift inside the EU, as well as the possibility that some investors may one day pose a threat to national security. This article concludes that although the current fragmented regulatory approach is unsatisfactory, because of the difficulties associated with a unified EU-wide review process, the most realistic option is to promote a more systematic and coordinated use of existing mechanisms such as competition policy. Also, pushing for the negotiation of a China–EU BIT is certainly a promising avenue to enhance the EU’s bargaining leverage based on the principle of positive reciprocity.     

Upgrading in China’s apparel industry: international trade,local clusters and institutional contexts

This article focuses on the concept of upgrading, and seeks to move away from a firm-centred approach of industrial upgrading towards a framework that recognises not only a firm’s integration into global value chains, but also its embeddedness within local networks and the context of wider institutional arrangements. Based on one firm-level database, this article measures upgrading in China’s apparel industry at the firm level, which allows us not only to evaluate the extent of upgrading in the industry as a whole and to compare its extent among individual firms and selected groups of firms, but also to differentiate and measure different types of upgrading. Empirical results confirm that the heterogeneity of firms, global and local linkages and the wider historical, political, institutional and economic context have all played a critical role in the process of upgrading, suggesting that a focus on dynamics of firm upgrading alone is insufficient.