October 2020 issue contents
To Guide or Not to Guide? Quantitative Monetary Policy Tools and Macroeconomic Dynamics in China

Hongyi Chen,^a,b Michael Funke,^c,d Ivan Lozev,^e and Andrew Tsang^c

Abstract

This paper discusses the macroeconomic effects of China's quantity-based banking regulatory tool, "window guidance," introduced in 1998. Using an open-economy DSGE model that includes a commercial banking sector, we study the stabilizing effects of this nonstandard quantitative monetary policy tool and the implications of quantity-based versus price-based monetary policy instruments for welfare. The analyses are relevant to the current overhaul of Chinese monetary policy.

JEL Codes: C61, E32, E44, E52.

 
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