Abstract
We propose a unique time-varying identification approach to the market interest rate based on Taylor Rule for coordinating the monetary and exchange rate policies. The significant differences exist between real and market interest rates — 2001 and 2009 are high real interest rates, and 2004-2005 and 2010-2012 low real interest rates — that identify monetary and exchange rate policy conflicts in China. These conflicts derive from the indirect effect of monetary factor through interest rate inertia and expected output gap in 2001; the indirect effect of exchange rate factor through interest rates and inflation inertia in 2004-2005; the direct effects of monetary and the exchange rate factors and the indirect effects through interest rate and inflation inertia, and the expected inflation and output gap since 2009. Our empirical results provide decision support for the monetary and exchange rate policy for reforming Chinese market interest rates.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: Journal of Advanced Computational Intelligence and Intelligent Informatics
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.