Guonan Ma: How loose is China’s monetary policy?

How loose is China’s monetary policy?
– has the People’s Bank of China outdone its major international peers in the latest global monetary easing game? The short answer is no.

by Guonan Ma on 1st July 2014

On the contrary, among the major central banks, the PBC appears to have tightened the most since the global financial crisis, on the basis of both ex-post real policy rate and real effective exchange rate.

In my recent blog, I discussed the debate over whether China’s monetary policy was excessively restrictive before the latest monetary easing. There, the debate was framed mostly from a domestic perspective, using a closed-economy version of the Taylor rule. This is in part justified on the ground that China’s capital controls still bind (See Ma and McCauley, 2007). Of course, China, known for its so-called ‘export-led’ growth model, hardly qualifies as a closed economy. | Read more at Bruegel

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