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Do interest rates play a major role in monetary policy transmission in China?

BIS Working Papers

No 714

 

Do interest rates play a major role in monetary policy transmission in China?

by Güneş Kamber and M S Mohanty

 

Monetary and Economic Department

April 2018

 

JEL classification: E31, C11, C32

Keywords: inflation; unobserved components; professional forecasts; sticky information; stochastic volatility; time-varying parameters; Bayesian; particle filter.

 

This publication is available on the BIS website (www.bis.org).

 

© Bank for International Settlements 2017. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated.

ISSN 1020-0959 (print)

ISSN 1682-7678 (online)

 

Do interest rates play a major role in monetary policy transmission in China?

Gunes Kamber and M S Mohanty

Bank for International Settlements

 

Abstract

We explore the role of interest rates in monetary policy transmission in China in the context of its multiple instrument setting. In doing so, we construct a new series of monetary policy surprises using information from high frequency Chinese financial market data around major monetary policy announcements. Our event analysis shows that monetary policy surprises have persistent effects on interest rates. We then use these surprise measur

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