Evaluating McCallum rule as policy guideline for China
Economists have reached a consensus that central bank could improve its policy efficiency by following a monetary policy rule. Given that money supply is the People’s Bank of China (PBC) principal policy instrument and its monetary targeting regime, this paper utilizes counterfactual simulation method to evaluate the feasibility of McCallum rule as a policy guideline for China in two simple macroeconomic models. The simulation results show that following McCallum rule could significantly reduce China’s nominal GDP fluctuations. The analysis shows that rule-specified path for the monetary base changes could be used as a benchmark for PBC’s policy decision.... [Show full abstract]
KeywordsMcCallum rule; PBC’s policy guideline; counterfactual simulation method; China; PBC's policy guideline; Economics
Fields of Research1402 Applied Economics; 1502 Banking, Finance and Investment; 1605 Policy and Administration
TypeConference Contribution - Published (Conference Paper)
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