Dollarization and Monetary Policy Spillovers

Liu Weiping ()
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Liu Weiping: China Development Bank

Chapter Chapter 8 in American Monetary Policy Adjustment and Its Impacts, 2023, pp 231-266 from Springer

Abstract: Abstract This chapter examines the spillover effects of the U.S. monetary policy in the context of dollarization by constructing a DSGE model of open economy with RMB asset liquidity constraint. The research shows that introducing the liquidity constraint of RMB in the international financial market can well reflect the characteristics of current economy in China. Dollarization will strengthen the international spillover effects of external shocks obviously and increase the domestic macroeconomic fluctuations in China. The market-oriented reform of exchange rate can effectively help to maintain financial and economic stability, greatly improve social welfare, and avoid the disadvantages of dollarization.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-99-7810-6_8

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DOI: 10.1007/978-981-99-7810-6_8

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