Monetary and Macroprudential Policies, Output, Prices, and Financial Stability

Authors

Jianli Sui
Biying Liu
Zhigang Li
Chengping Zhang, George Fox UniversityFollow

Document Type

Article

Publication Date

2022

Abstract

We examine the time-varying causal link between monetary policies and macroeconomy, macroprudential policies and financial stability in China. We find that expansionary monetary policy leads to output growth, tightening monetary policy leads to price stability, and tightening quantitative monetary policy or expanding price-based monetary policy is effective in maintaining financial stability. In response to stagnation or deflation, the central bank implements an expansionary monetary policy. To prevent financial turbulence, the central bank pursues an expansionary quantitative monetary policy or a tight price-based monetary policy. In addition, macroprudential policy should be used in conjunction with monetary policy to maintain financial stability.

Comments

Originally published in International Review of Economics and Finance

https://doi.org/10.1016/j.iref.2021.11.010

Recommended Citation

Sui, Jianli; Liu, Biying; Li, Zhigang; and Zhang, Chengping, "Monetary and Macroprudential Policies, Output, Prices, and Financial Stability" (2022). Faculty Publications - College of Business. 141.
https://digitalcommons.georgefox.edu/gfsb/141