Nine blind men and the PBoC

Makram El-Shagi and Yishuo Ma
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Yishuo Ma: Center for Financial Development and Stability at Henan University, and School of Economics at Henan University, Kaifeng, Henan

No 2021/2, CFDS Discussion Paper Series from Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China

Abstract: Over the past decade, several dozen papers have been written that identify the People’s Bank of China’s monetary policy shocks. Yet, what often seems like minor differences in measurements of monetary policy and identifying assumptions yield vastly different implied shocks. In this paper, we pitch 20 shock time series from the literature against each other in a horse race. We use a local projections framework to produce impulse responses based on all shocks for production, prices, money and interest rates and use them to assess the economic plausibility of the competing results. Our results confirm the frequently mentioned relevance of monetary aggregates for Chinese monetary policy but also point the importance of using forward looking policy reaction functions (or account for forward looking variables in a VAR framework) when identifying monetary policy shocks.

Keywords: China; monetary policy shocks; local projections; meta study (search for similar items in EconPapers)
JEL-codes: C83 E52 (search for similar items in EconPapers)
Date: 2021-07
New Economics Papers: this item is included in nep-cba, nep-cna, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fds:dpaper:202102

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