Economics, Econometrics and Finance
3 years ago

Chinese central bank favors discretionary monetary policy for economic stability.

SSRN Electronic Journal
Commitment or Discretion? An Empirical Investigation of Monetary Policy Preferences in China
Ding Liu, Yue Zhang, Weihong Sun

Paper Summary

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China's central bank prefers discretionary monetary policy over commitment. The main goal is to maintain price stability, followed by output stability and interest rate smoothing. Data analysis from 1992 to 2017 supports this preference. If the central bank could commit, macroeconomic outcomes could potentially improve.