Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315478 
Year of Publication: 
2025
Series/Report no.: 
BOFIT Discussion Papers No. 2/2025
Publisher: 
Bank of Finland, Bank of Finland Institute for Emerging Economies (BOFIT), Helsinki
Abstract: 
The monetary policy of the People's Bank of China (PBoC) during 2001-2023 is assessed in terms of Taylor and McCallum rules, as well as a proposed composite monetary policy rule. PBoC policy is found to be responsive to the gap between target and actual nominal GDP in the McCallum rule, as well as the output and inflation gaps in the Taylor rule. We find a relatively close fit between actual and predicted monetary policy moves under both rules, and a superior fit with our composite rule incorporating 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. The results are shown to be robust using several techniques.
Subjects: 
monetary policy
People's Bank of China
policy rules
inflation
deflation
JEL: 
E58
E52
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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