The international transmission of Chinese monetary policy and the commodity channel

Fabrizio Ferriani () and Andrea Giovanni Gazzani
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Fabrizio Ferriani: Bank of Italy

No 1510, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper examines the international transmission of Chinese monetary policy. We show that, unlike the financial channel typical of US monetary policy, Chinese policy shocks propagate through a real-side demand mechanism, driven by monetary-fiscal interactions that stimulate commodity-intensive infrastructure investment. Consistent with this channel, metal and energy commodity prices are the most responsive to Chinese monetary policy shocks. We quantify the resulting inflationary spillovers using counterfactual methods. The commodity channel accounts for approximately 70 per cent of producer price spillovers to advanced economies, with the largest impact concentrated in countries heavily dependent on commodity imports, such as the four largest European economies. Finally, Chinese monetary policy significantly affects financing conditions in commodity-exporting emerging markets.

Keywords: China; monetary policy; commodity prices; spillovers; VARs; counterfactuals (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 F41 Q02 Q43 (search for similar items in EconPapers)
Date: 2025-12
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