Measuring China's monetary sterilization and autonomy in the era of globalization: 1995-2005

Ying Wu

Journal of Asian Economics, 2009, vol. 20, issue 3, 336-347

Abstract: This paper provides a cointegration analysis of incomplete monetary sterilization and autonomy in China when both financial controls and the exchange rate peg exist. According to an estimated long-run equilibrium relation, only 35 cents are sterilized for a yuan of foreign-exchange reserve that flows into China. In response to the movement in foreign-exchange reserves, M2 proves more endogenous than M1; and in the M2 elasticity model, as the forecast horizon extends, the domestic-credit component of the monetary base exhibits its significant endogeneity with respect to the foreign-asset component, whereas the endogeneity of the foreign-asset component also rises with respect to M2.

Keywords: Monetary; base; Money; supply; Monetary; sterilization; Cointegration; Foreign-exchange; reserves (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:20:y:2009:i:3:p:336-347

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