Money Market Operations in China: Monetary Policy or FX Policy?

Shigeto Nagai and Hong Wang
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Shigeto Nagai: Bank of Japan
Hong Wang: Bank of Japan

No 07-E-13, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper discusses the role of money market operations by the Chinese central bank in a transition period of the monetary policy framework. We argue that in recent years, especially before and after the change in the foreign exchange rate regime in July 2005, money market operations have been focused mainly on China-US interest rate differentials, which significantly influence the RMB exchange rate. On the other hand, the task of demand control for the purpose of price stability continues to rely on direct control measures taken by the central bank and other government agencies with respect to bank lending and investment.

Keywords: Money Market Operations; Exchange Rate Policy; Interest Rate Differentials (search for similar items in EconPapers)
Date: 2007-05
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Citations: View citations in EconPapers (5)

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