Is the US quantitative easing more effective than China's? A second thought |
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| Institution: | 1. Hanqing Advanced Institute of Economics and Finance, Renmin University of China, Beijing 100872, China;2. American Institute for Economic Research, Great Barrington, MA 01230-1119, USA;1. China Economics and Management Academy, Central University of Finance and Economics, 39 South College Road, Beijing 100081, China;2. Center for Chinese Agricultural Policy, Institute of Geographical Sciences and Natural Resource Research, Chinese Academy of Sciences, 11A Datun Road, Chaoyang, Beijing 100101, China;3. School of Advanced Agricultural Sciences, Peking University, 5 Yiheyuan Rd, Haidian, Beijing 100089, China;4. U.S. Grains Council China, Beijing, China World Office 1, Suite 1010C, No. 1 Jianguomenwai Ave., Beijing 100004, China;1. School of Economics and Management, Beihang University, Beijing 100191, China;2. Center for Chinese Agricultural Policy (CCAP), Institute of Geographical Sciences and Natural Resources Research, Chinese Academy of Sciences, Beijing 100101, China;3. Southern Africa Regional Office, International Water Management Institute, Private Bag X813, Silverton, Pretoria 0127, South Africa;1. The Wang Yanan Institute for Studies in Economics (WISE), The MOE Key Laboratory of Econometrics, Xiamen University, Fujian 361005, China;2. Oppo Manado, St. Pierre Tendean, Ruko Mega Style Block D no 23, Megamas Boulevard, Manado, Sulut 95111, Indonesia |
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| Abstract: | We study the balance sheet of the People's Bank of China and the Federal Reserve Bank in a historical context and analyze whether the recent round of global expansionary monetary policy has been effective in achieving its desired economic effects. In particular, we focus on the roles played by excess reserves, monetary aggregates and financing to the real economy and highlight the tension between a liquid financial sector and an illiquid real sector. We show that, while both China and the US have followed reserve-driven growth strategies, the compositions and relative sizes of these quantities are quite different. In relative terms, excess reserves and lackluster corporate lending constitute a big problem for the US, whereas for China the pertinent question is how to further mobilize funds tied up in the real estate and stock market. We provide some thoughts on possible solutions to the current policy dilemma at the end. |
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