Faculty Publications - College of Business
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.
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.
Originally published in International Review of Economics and Finance