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Monetary policy announcements and market interest rates’ response: Evidence from China

Rongrong Sun ()

Journal of Banking & Finance, 2020, vol. 113, issue C

Abstract: This paper examines the daily responses of market interest rates to three monetary policy announcements in China using the event-study approach. I find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve. By contrast, market interest rates barely respond to the qualitative MPC announcements about the monetary policy stance. These findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption. These findings suggest that the PBC should formulate its policy communication in a quantitative way.

Keywords: Transmission of monetary policy; Policy announcement effects; Event study; China (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Date: 2020
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Related works:
Working Paper: Monetary Policy Announcements and Market Interest Rates Response: Evidence from China (2018) Downloads
Working Paper: Monetary Policy Announcements and Market Interest Rates’ Response: Evidence from China (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:113:y:2020:i:c:s0378426620300303

DOI: 10.1016/j.jbankfin.2020.105766

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