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Monetary policy based on nonlinear quantity rule: Evidence from China

Yong Ma

International Review of Economics & Finance, 2014, vol. 34, issue C, 89-104

Abstract: This paper investigates nonlinearities in a quantity-based monetary policy rule for China within a New Keynesian DSGE model. Empirical results from Bayesian estimation show that the central bank of China has adopted a nonlinear quantity rule over the period of 1992Q1–2013Q3. Moreover, evidence from sub-period estimation further indicates that there is a significant policy regime shift leading towards a more strict inflation targeting regime during 1999Q1–2013Q3. From a policy perspective, the nonlinear quantity rule proposed in this paper provides us with a useful tool for describing and analyzing monetary policies in emerging market economies.

Keywords: Monetary policy; Nonlinear quantity rule; New Keynesian model (search for similar items in EconPapers)
JEL-codes: E62 E63 H62 (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.iref.2014.07.007

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