Monetary policy,asset prices and consumption in China

This paper studies the wealth channel in China. Although the wealth channel has been found to be functioning in many advanced countries, its existence is yet to be explored in most emerging economies, also in China. In order to illuminate dynamics between monetary policy, asset prices and consumption, we use the structural vector autoregression method. The findings support the view that a loosening of China's monetary policy does indeed lead to higher asset prices. Furthermore, a positive shock to residential prices increases household consumption, while the role of stock prices seems to be small from the households’ point of view. Finally, we test the existence of the wealth channel more formally to find out whether those changes in asset prices that are caused by monetary policy are significant enough to increase consumption. In summary, the wealth channel remains weak but there are some signs of it via residential prices. The results are not that different from those attained for the advanced economies, where the size of the wealth channel has been found to be limited.     

Equilibrium exchange rates in oil-exporting countries

We assess the determinants of equilibrium real exchange rates in a sample of oil-dependent countries. Our data cover OPEC countries from 1975 to 2005. Utilising pooled mean group and mean group estimators, we find that the price of oil has a clear, statistically significant effect on real exchange rates in our group of oil-producing countries. Higher oil price lead to appreciation of the real exchange rate. Elasticity of the real exchange rate with respect to the oil price is typically between 0.4 and 0.5, but may be even larger depending on the specification. Real per capita GDP, on the other hand, does not appear to have a clear effect on real exchange rate. This latter result contrasts starkly with many earlier papers on real exchange rate determination, emphasising the unique position of oil-dependent countries.

Cointegration analysis of the Fed model

The Fed model postulates that the equity earnings yield follows the bond yield in the long run. Our tests based on a cointegration analysis of the United States, United Kingdom and German data indicate that the Fed model has predictive power in forecasting changes in the equity prices, earnings and bond yields. The predictions are better in the US than in other countries. Our approach consists of building a Vector Equilibrium Correction model which provides a quantitative dynamic version of the Fed model.     

中国的汇率政策和亚洲贸易

编者按:中国经济快速发展,贸易盈余不断扩大,世界贸易不平衡持续加剧,这种失衡状态不仅成为中国,而且成为世界各国近年来广泛关注的热点问题之一.本次金融危机虽然使各国经济发展步伐放缓,但世界经济的根本格局未变,在各国经济逐步走出低谷之后,预计世界贸易不平衡格局将进一步延续,对这一问题的关注将不可避免.人民币汇率升值能否改变中国和亚洲国家的贸易盈余,进而改善世界贸易不平衡状况成为问题的核心.