The impact of Chinese monetary policy shocks on East Asia

Tomasz Kozluk and Aaron Mehrotra

No 5/2008, BOFIT Discussion Papers from Bank of Finland Institute for Emerging Economies (BOFIT)

Abstract: We study the effects of Chinese monetary policy shocks on China s major trading partners in East Asia by estimating structural vector autoregressive (SVAR) models for six economies in the region. We find that a monetary expansion in Mainland China leads to an increase in real GDP (temporary) and the price level (permanent) in a number of economies in our sample, most notably in Hong Kong and the Philippines. The impact could result from intertemporal substitution present in a general equilibrium framework which allows for positive domestic impacts of foreign monetary expansions. Our results emphasize the growing importance of China for its neighboring economies and the significance of Chinese shocks for the design of monetary policy in Asian economies.

Keywords: monetary policy shocks; Asian production chain; SVAR; East Asia; China (search for similar items in EconPapers)
JEL-codes: E52 F42 (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofitp:bdp2008_005

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