Evaluating McCallum rule as a policy guideline for China

Bibliographic Data

ID12550239
AuthorsShuzhang Sun (Jiangxi University of Finance and Economics, corresponding author), Chen Gan (0000-0002-5618-1651, Lincoln University), Baiding Hu (0000-0002-0991-1375, Lincoln University)
Year2012
Volume17
Issue3
Pages527-545
Publication date2012-06-25
Open AccessNo
TypeARTICLE
VenueJournal of the Asia Pacific Economy (JOURNAL)
Journal identifiersISSN: 1354-7860 • E-ISSN: 1469-9648
PublisherRoutledge (PUBLISHER • GB)
DOI10.1080/13547860.2012.694714
OpenAlexW2087374048
LanguageEN
Citations received1
References cited23

Economists have reached a consensus that central bank can improve their policy efficiency by following a monetary policy rule. Given that money supply is the principal policy instrument of the People's Bank of China (PBC) and its monetary targeting regime, this paper utilizes the counterfactual simulation method to evaluate the feasibility of the McCallum rule as a policy guideline for China in two simple macroeconomic models. The simulation results show that following the McCallum rule could significantly reduce China's nominal GDP fluctuations. The analysis shows that a rule-specified path for monetary base changes could be used as a benchmark for PBC's policy decision. Therefore, we strongly advocate that the PBC adopt the McCallum rule as its policy guideline in future policymaking

Benchmark (surveying · Central bank · China · Counterfactual thinking · Credit channel · Econometrics · Economics · Forward guidance · Guideline · Inflation targeting · Macroeconomics · Monetary policy · Political science · Principal (computer security · Taylor rule · Computer Science · Fiscal Policies and Political Economy · Global Financial Crisis and Policies · Monetary Policy and Economic Impact

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