Pierre L. Siklos (Wilfrid Laurier University) - Combatting Crises and Deflation in China: Modelling People’s Bank Policymaking Through the Pandemic

BOFIT seminars

BOFIT Seminar - Pierre L. Siklos (Wilfrid Laurier University) - Combatting Crises and Deflation in China: Modelling People’s Bank Policymaking Through the Pandemic

Abstract

People’s Bank of China monetary policy during 2001-2023 is assessed in terms of McCallum and Taylor rules as well as a composite index. We find support for People’s Bank policy being responsive to the gap between target and actual nominal GDP in the McCallum rule as well as output and inflation gaps in the Taylor rule. We find a relatively close fit between actual and predicted monetary policy moves under both rules, with an even better fit arising under a composite index that includes both monetary and interest rate factors. The policy reactions persist across a series of transitions between high and low volatility regimes identified via Markov-switching regressions.

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