Monetary and macroprudential policies, output, prices, and financial stability

Jianli Sui, Biying Liu, Zhigang Li and Chengping Zhang

International Review of Economics & Finance, 2022, vol. 78, issue C, 212-233

Abstract: We examine the time-varying causal link between monetary policies and macroeconomy, macroprudential policies and financial stability in China. We find that expansionary monetary policy leads to output growth, tightening monetary policy leads to price stability, and tightening quantitative monetary policy or expanding price-based monetary policy is effective in maintaining financial stability. In response to stagnation or deflation, the central bank implements an expansionary monetary policy. To prevent financial turbulence, the central bank pursues an expansionary quantitative monetary policy or a tight price-based monetary policy. In addition, macroprudential policy should be used in conjunction with monetary policy to maintain financial stability.

Keywords: Monetary policy; Macroprudential policy; Output; Price; Financial stability (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 G18 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:78:y:2022:i:c:p:212-233

DOI: 10.1016/j.iref.2021.11.010

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