“China’s evolving monetary policy rule: from inflation accommodating to anti-inflation policy”

“China’s evolving monetary policy rule: from inflation accommodating to anti-inflation policy”

Eric Girardin, Sandrine Lunven and Guonan Ma

BIS Working Papers No. 641, May 2017

Since the early 90’s China has experienced massive liberalizations and transformations within its economy. Therefore, it is probable that China’s monetary policy has evolved as a byproduct of these effects. The aim of this paper is to construct a new discrete monetary policy index (MPI), which is able to assess the policy and its changes. Furthermore, they use this index to estimate a People’s Bank of China (PBC) monetary policy rule, to analyze whether the major transformations associated with the last two decades in China had an effect on the reaction function of the PBC.