Abstract
This paper examines the role of confidence in Chinese monetary policy under uncertainty. Using a smooth transition vector autoregression (STVAR) model conditional on uncertainty, we find that monetary policy is considerably less effective in high-uncertainty status. We further conduct counterfactual decompositions to isolate the role of confidence in the transmission of monetary policy shocks, and show that the effectiveness of proactive monetary policy is reduced if it fails to inspire entrepreneurs’ confidence. These results are robust to alternative measurements of uncertainty.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
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.