EconPapers    
Economics at your fingertips  
 

Macroprudential Policy, Central Banks and Financial Stability: Evidence from China

Jan Klingelhöfer and Rongrong Sun ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the Chinese case to show that a central bank can use macroprudential policies to play an active role in safeguarding financial stability. The narrative approach is used to disentangle macropudential policy actions from those monetary. We show that many monetary policy tools, such as the reserve requirement, window guidance, supervisory pressure and housing-market policies, can be used for macroprudential purposes. Time series are constructed to measure macroprudential tightness/ease. The VAR estimates suggest that macroprudential policy has immediate and persistent impact on the credit cycle, but no significant effect on output. Macroprudential policy can be used either alone to retain financial stability, without harming the real economy; or as a complement to monetary policy to offset the buildup of financial vulnerabilities resulted from a monetary easing. Our analysis suggests that it is the multi-instrument framework that enables a central bank to achieve both macroeconomic and financial stability objectives. This finding has implications for the current debates on the post-crisis central bank’s operating regime.

Keywords: macroprudential policy; monetary policy; credit cycle; financial stability; China (search for similar items in EconPapers)
JEL-codes: E44 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
Date: 2017-02-15
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/79033/1/MPRA_paper_79033.pdf original version (application/pdf)

Related works:
Working Paper: Macroprudential Policy, Central Banks and Financial Stability: Evidence from China (2017) Downloads
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:pra:mprapa:79033

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2019-07-20
Handle: RePEc:pra:mprapa:79033