Title: Re-assessing monetary policy shocks in China
Authors: Bjoern van Roye - European Central Bank (Germany) [presenting]
Alistair Dieppe - European Central Bank (Germany)
Paolo Bonomolo - Sveriges Riksbank (Sweden)
Abstract: The effects of monetary policy shocks on economic activity in China is investigated by using a variety of Bayesian VAR techniques. We show that monetary policy shocks appear to have a significant effect on economic activity under standard BVAR specifications. These findings are robust across different model specifications and different interest rate measures. However, this result changes when we consider a specification which takes into account the non-stationarity of the data. In particular, we consider an underlying economic model for the long-run with either a linear trend for GDP or with a common time-varying equilibrium on the steady-state jointly with foreign demand. In the latter case we find that the common structural explanation for the economic downturn crowds out the role of interest rates.