Policy Contribution
In the midst of the heated monetary policy debate, the People’s Bank of China (PBC) since mid-2014 has no doubt started loosening its monetary policy, initially tentatively and later more forcefully. Is such a policy shift warranted and desirable?
Blog Post
The Chinese renminbi (RMB) depreciated 2.5 percent against the US dollar in 2014. This was the first depreciation since 2005, when Beijing timidly started loosening its tight dollar peg. Recently, the RMB has repeatedly tested the weak side of its daily trading band, despite attempts by the People’s Bank of China (PBC) to signal its preference for a steadier bilateral RMB-USD rate via its daily fixing (Figure 1, left panel). What has led to the changing fortunes of the RMB? What lies ahead for the currency in 2015?
Blog Post
Since early 2014, the People’s Bank of China (PBC), the Chinese central bank, has deployed multiple policy tools to loosen its monetary policy stance, including cutting its benchmark bank interest rates, relaxing mortgage terms, tinkering with the outdated loan-deposit ratio rule, selectively cutting some reserve requirements and injecting liquidity into the banking system via various new facilities.
Opinion
The People’s Bank of China (PBC), the Chinese central bank, finally cut its benchmark interest rates on 21 November, after easing its policy in a shadow-boxing fashion for more than six months. This is a vindication of our strong and non-consensus view that China ought to ease its monetary policy. There is more Chinese easing to come, in my view.
Blog Post
There have been definite signs of monetary loosening in China in recent weeks. Nevertheless, for almost a year, the debate continues to rage over whether the People’s Bank of China (PBC) should loosen its monetary policy more meaningfully in a situation of weakening domestic demand. Has China’s monetary policy stance been too restrictive lately? If so, how should the PBC ease monetary policy?
Blog Post
On the contrary, among the major central banks, the PBC appears to have tightened the most since the global financial crisis, on the basis of both ex-post real policy rate and real effective exchange rate.
Opinion
Since China is the number one trading nation, the second largest economy and a large net creditor, the world has a huge stake in how China manages its tricky transition from a state of binding capital controls to one of closer integration with the global financial market and system.
Blog Post
Part I discusses three institutional factors favouring a strategy of greater currency flexibility ahead of fuller domestic interest rate liberalisation. Part II (coming later this week) explores three cyclical factors that would tend to favour the same strategy.
Working Paper
This paper develops a new underlying inflation gauge (UIG) for China which differentiates between trend and noise, is available daily and uses a broad set of variables that potentially influence inflation. Its construction follows the works at other major central banks, adopts the methodology of a dynamic factor model that extracts the lower frequency components as developed by Forni et al (2000) and draws on the experience of the People’s Bank of China in modelling inflation.
Blog Post
A successful Chinese economy needs both structural reforms on the supply side to enhance potential growth, and a nimble monetary policy to fully exploit such potential on the demand side. Guonan Ma discusses six reasons why China ought to ease its monetary policy stance.
Blog Post
In the wake of the latest easing of Chinese monetary policy, the CBRC, China’s banking regulator, has recently modified a few details of how it calculates the bank loan/deposit ratio, which is currently capped at 75 percent by the country’s banking law.
Blog Post
The pronounced slowdown in China’s GDP growth in recent years has raised the important question of what might be its principal causes.