Twelve Blind Men and the PBoC

Makram El-Shagi and Yishuo Ma
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Makram El-Shagi: Center for Financial Development and Stability, School of Economics, Henan University
Yishuo Ma: Center for Financial Development and Stability, School of Economics, Henan University & School of Agriculture and Rural Development, Henan University of Economics and Law

Czech Journal of Economics and Finance (Finance a uver), 2025, vol. 75, issue 1, 2-28

Abstract: Over the past decade, several dozen papers have been written that identify the People's Bank of China's monetary policy shocks. Yet, what often seems like minor differences in measurements of monetary policy and identifying assumptions yield vastly different implied shocks. In this paper, we pitch 21 shock time series from the literature against each other in a horse race. We use a local projections framework to produce impulse responses based on all shocks for production, prices, money and interest rates and use them to assess the economic plausibility of the competing results. Our results confirm the frequently mentioned relevance of monetary aggregates for Chinese monetary policy but also point the importance of using forward looking policy reaction functions (or account for forward looking variables in a VAR framework) when identifying monetary policy shocks.

Keywords: China; monetary policy shocks; local projections; meta-study (search for similar items in EconPapers)
JEL-codes: C83 E52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:75:y:2025:i:1:p:2-28

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