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The transition to market-based monetary policy: What can China learn from the European experience?

Forssbaeck, Jens LU and Oxelheim, Lars LU (2007) In Journal of Asian Economics 18(2). p.257-283
Abstract
We discuss the prospects for Chinese money market development and transition to market-based monetary policy operations based on a comparative historical analysis of the present Chinese situation and the development in 11 European countries from 1979 up to the launch of the European Economic and Monetary Union (EMU). Central banks in the latter group of countries typically had an incentive to encourage the formation of efficient benchmark segments in the domestic money markets for the conduct of open market operations as traditional quantity-oriented instruments became increasingly ineffective. China is displaying many of the same symptoms as the European countries in the 1970s and 1980s, including poor monetary transmission due to excess... (More)
We discuss the prospects for Chinese money market development and transition to market-based monetary policy operations based on a comparative historical analysis of the present Chinese situation and the development in 11 European countries from 1979 up to the launch of the European Economic and Monetary Union (EMU). Central banks in the latter group of countries typically had an incentive to encourage the formation of efficient benchmark segments in the domestic money markets for the conduct of open market operations as traditional quantity-oriented instruments became increasingly ineffective. China is displaying many of the same symptoms as the European countries in the 1970s and 1980s, including poor monetary transmission due to excess liquidity and conflicts of interest due to unclear priority among multiple policy goals.We conclude that in a number of aspects, current Chinese monetary policy operations are counter-productive to efforts to develop an efficient money market that can serve as arena for an effective market-based monetary policy, and provide policy recommendations. (Less)
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Monetary policy operations, Money market, China, European Union, Deregulation
in
Journal of Asian Economics
volume
18
issue
2
pages
257 - 283
publisher
Elsevier
external identifiers
  • scopus:33947405313
ISSN
1049-0078
DOI
10.1016/j.asieco.2007.02.001
language
English
LU publication?
yes
id
837dfa32-261a-499c-b8c6-3db08d65589a (old id 4612635)
alternative location
http://www.sciencedirect.com/science/article/pii/S1049007807000048#
date added to LUP
2014-09-15 11:00:25
date last changed
2017-01-01 06:44:59
@article{837dfa32-261a-499c-b8c6-3db08d65589a,
  abstract     = {We discuss the prospects for Chinese money market development and transition to market-based monetary policy operations based on a comparative historical analysis of the present Chinese situation and the development in 11 European countries from 1979 up to the launch of the European Economic and Monetary Union (EMU). Central banks in the latter group of countries typically had an incentive to encourage the formation of efficient benchmark segments in the domestic money markets for the conduct of open market operations as traditional quantity-oriented instruments became increasingly ineffective. China is displaying many of the same symptoms as the European countries in the 1970s and 1980s, including poor monetary transmission due to excess liquidity and conflicts of interest due to unclear priority among multiple policy goals.We conclude that in a number of aspects, current Chinese monetary policy operations are counter-productive to efforts to develop an efficient money market that can serve as arena for an effective market-based monetary policy, and provide policy recommendations.},
  author       = {Forssbaeck, Jens and Oxelheim, Lars},
  issn         = {1049-0078},
  keyword      = {Monetary policy operations,Money market,China,European Union,Deregulation},
  language     = {eng},
  number       = {2},
  pages        = {257--283},
  publisher    = {Elsevier},
  series       = {Journal of Asian Economics},
  title        = {The transition to market-based monetary policy: What can China learn from the European experience?},
  url          = {http://dx.doi.org/10.1016/j.asieco.2007.02.001},
  volume       = {18},
  year         = {2007},
}