The evolution of monetary rules with financial stability considerations

Yao Hou, Rong Li, Danxia Xie, Longtian Zhang and Qingquan Zhang

Applied Economics, 2023, vol. 55, issue 45, 5267-5286

Abstract: In this study, we estimate and investigate the evolution of monetary rules in China and the United States in the 21st century. Our goal is to examine whether financial stability has been taken into consideration in the decision-making of monetary policy. By proposing a new method, we estimate the structural breaks, split the entire time period into multiple monetary regimes, and estimate an extended Taylor rule with financial stability considerations and its evolution over time. Our findings show that China’s monetary policy emphasized the financial stress of the U.S. immediately before and during the 2008 global financial crisis. However, the coefficient for the U.S. financial stress has decreased since then, which shows a weaker concern on this index, and instead, the Chinese policymakers are emphasizing stronger on their domestic financial market.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2022.2138819 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:55:y:2023:i:45:p:5267-5286

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2022.2138819

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().