China: Strengthening Monetary Policy Implementation

Bernard Laurens and Rodolfo Maino

No 2007/014, IMF Working Papers from International Monetary Fund

Abstract: The People's Bank of China (PBC) has made great strides in modernizing its monetary policy frameworks but their effectiveness will diminish as the sophistication of the economy increases. Empirical evidence supports maintaining a reference to money in China's monetary strategy and enhancing the role of interest rates in its conduct. We advocate adoption of an eclectic strategy involving the monitoring of several indicators, and of a short-term interest rate as the operational target. The PBC should be granted discretion to change its policy rate, and there are no technical obstacles for such a move to occur in the near future.

Keywords: WP; excess reserves; interbank market; banking sector; foreign exchange; inflation targeting; money supply (search for similar items in EconPapers)
Pages: 51
Date: 2007-01-01
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Citations: View citations in EconPapers (54)

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