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East Asian Economic Review
Article . 2021
Data sources: DOAJ
EconStor
Article . 2021
License: CC BY
Data sources: EconStor
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Evolution of China’s Economy and Monetary Policy: An Empirical Evaluation Using a TVP-VAR Model

Authors: Kim, Seewon;

Evolution of China’s Economy and Monetary Policy: An Empirical Evaluation Using a TVP-VAR Model

Abstract

China has experienced many structural changes in the process of economic development over the past three decades. Using a time-varying parameter VAR model with stochastic volatility and mixture innovations, this study investigates whether such structural changes in, especially tools and operational aims of monetary policy, affect the monetary transmission mechanism. We find that impulse responses of output growth and inflation to monetary shocks have substantially increased and then reversed to decrease around 2005-2006. This time variation is mainly caused by changes in the monetary transmission mechanism, i.e., the manner in which main macroeconomic variables respond to policy shocks, rather than by changes in volatilities of exogenous shocks. The result implies that aggressive monetary policy to facilitate economic growth in the developing economies may be legitimized, unless it causes inflation seriously.

Keywords

ddc:330, monetary policy, Evolution of Transmission Mechanism, Stochastic Volatility, Time-Varying Impulse Responses, Monetary Policy, Economics as a science, evolution of transmission mechanism, time-varying impulse responses, stochastic volatility, E30, E52, HB71-74, C11

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
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