اندازه گیری موضع سیاست پولی از بانک خلق چین: تجزیه و تحلیل سفارش داده پروبیت

The People's Bank of China (PBC) has employed a range of different instruments in the implementation of its monetary policy over the past decades, so perhaps no single instrument would constitute an adequate representation of the monetary policy stance. We thus develop a new policy stance index, and examine it in an ordered probit model, which follows the studies by Gerlach (2004) and He and Pauwels (2008). The empirical results show that in a backward-looking model, monetary policy reacts to actual output growth; one the other hand, when deviations from trend levels are considered, the PBC concerns inflation most seriously. In a forward-looking model, when we examine the PBC's statements in its quarterly Monetary Policy Executive Report from 2001Q1 to 2010Q3, it seems that the PBC's assessment of the prospects for inflation plays a key role determining the PBC's monetary policy stance. Our conclusions suggest that the PBC is informally targeting inflation, although no explicit target has ever been announced to the public by the PBC.

As an important component of the framework of China's macroeconomic policy, the monetary policy operations of the People's Bank of China (PBC) have become of great concern to the rest of the world. One example is the disagreements over China's foreign exchange rate policy between China and its main trading partners such as the US and the EU since the 1990s, for which the value of the RMB is a cause for concern over cheaper and more competitive Chinese products. However, despite the growing literature on China's monetary policy, less attention has been paid to looking for an indicator which can accurately represent the stance of monetary policy. As Bernanke and Mihov (1998) indicate, measuring monetary policy accurately is important both to policy makers for practical reasons and to researchers for analytical reasons. A good measure of the monetary policy stance should be able to tell us, either qualitatively or quantitatively, whether monetary policy is becoming contractionary, unchanged, or expansionary. Most current studies only focus on the link between the changes in a single policy instrument (or a single monetary indicator) and the macroeconomic situation in considering monetary policy stance. For example, in many studies the growth rate of broad money supply M2 is often used as an indicator to represent the PBC's monetary policy stance. By 2009, M2 was almost forty times higher than in 1990, with an average nominal annual growth rate over the period of 21.4% per annum. Can we simply conclude, based on the fast growth rate of M2, that China has conducted an expansionary monetary policy throughout the past two decades? The answer is “No”, particularly when the PBC officially announced a switch from a loose monetary policy towards fighting the battle against high inflation in 2007 and 2009. One significant difference between the measure of policy stance used by Bernanke and Mihov (1998) and that of other studies is that they account for the federal funds rate, nonborrowed reserves and total reserves in their indicator of policy stance, because they argue that the Fed's operating procedure evolved substantially during the period of interest to them. This concern is particularly relevant for studies of the Chinese case. Given the rapid process of economic transition in China since the early 1980s, the operating procedures of the monetary authority have been changing dramatically over time as well. Thus, to measure policy stance accurately requires us to take into account a wider range of monetary policy instruments. To this end, the main contribution of this paper is the construction a new policy stance index for China between 1986Q4 and 2010Q3. Once such a measure is constructed, a monetary reaction function can then be used to identify the connection between this measure and the state of the economy. Instead of the standard OLS analyses, the main empirical results in this paper are obtained in the framework of an ordered probit approach. In addition, to study the relationship between the monetary policy stance and the PBC's own interpretations of the state of the economy, we attempt to extract information on the PBC's assessment of the outlook from statements in the PBC's Quarterly Monetary Policy Executive Report since its first issue in 2001Q1. It seems that this is the first time such an exercise has been done for China. Given the less than transparent process of monetary policy making, we hope this approach may shed some light on China's monetary policy reactions and help us understand the making of monetary policy by the authorities. The structure of this paper is as follows. Section 2 provides a review of the literature on the monetary policy stance, and the role of policy stance measures in examining monetary policy operations. Section 3 explains the construction of an index for measuring the change in the stance of monetary policy in China from 1986Q4 to 2010Q3. Section 4 presents some empirical results on the relationship between the policy index and key economic variables in an ordered probit model. We then examine the links between the policy index and the PBC's interpretations of the state of the economy between 2001Q1 and 2010Q3 as represented by some narrative indicator variables. Section 5 gives a summary of the paper's findings.

China's central bank, the People's Bank of China, has employed a range of different instruments in the implementation of its monetary policy over the past decades. This complicates the identification of the PBC's monetary policy stance because no single instrument would constitute an adequate representation of the monetary policy stance. We therefore follow He and Pauwels (2008) in constructing a new measure of monetary policy changes for the PBC. One remarkable feature of our measure (which we call a policy change index) is that it considers the changes in the various monetary policy instruments implemented by the PBC since 1986, and can therefore be considered as a comprehensive representation of the PBC's policy changes. In order to capture how the PBC reacts to economic developments, we examine the policy change index in the framework of an ordered probit model. Some main conclusions are as follows. Firstly, current output plays an important role in the PBC's monetary policy decisions. Second, the PBC responds less strongly to current inflation conditions, but more strongly to the deviation of actual inflation from its long-term trend level. This may be because output growth has some leading implications for future inflation. Third, monetary policy changes are less closely tied to the growth rate of M1 and the nominal effective exchange rate. The reason for this may be that when the RMB appreciates, the authorities prefer to stimulate exports through fiscal policy in terms of subsidies rather than changing the monetary policy stance. Fourthly, empirical and graphical evidences suggest that the PBC's policy decision making has no clear characteristic of a quasi-mean-reverting pattern. However, the model using contemporaneous data available on output, inflation, monetary growth, and nominal effective exchange rate has a low goodness of fit, which suggests a relatively weak response of our policy change index to those data. Therefore, we turn to a forward-looking monetary reaction function instead of the backward-looking one. Since the PBC's monetary policy decisions may depend on its own interpretations of the changes in the macro economy, we develop a set of subjective measures of these interpretations, the first time this approach has been done in studies of China's monetary policy. Firstly, we collect the PBC's outlooks and assessments of the macroeconomic conditions by reading the Quarterly Monetary Policy Executive Report between 2001Q1 and 2010Q3. Secondly, a set of subjective indicator variables is constructed based on these statements. And next we test the policy change index with these indicator variables in the ordered probit model. Results show that when the PBC perceives a risk of a higher inflationary pressure, it will react by implementing a tighter monetary policy. Although there are fewer observations, we obtain a higher goodness of fit than in the backward-looking reaction model in Section 4. Finally, when we make a strong assumption that the PBC has a perfect foresight, we use a leading actual data in the regression. We find that inflation again turns out to be the most important variable. This forward-looking reaction function helps us to understand the important role of inflation in the PBC's monetary policy implementation. So it may be inferred that China is informally targeting inflation, although no explicit target has ever been announced by the PBC. In summary, this paper presents some preliminary but interesting analysis of China's monetary policy stance, and its reactions to the changes in economic conditions. The constructed policy change index may shed some light on the PBC's monetary policy decisions since 1986. It leaves room for further analysis which could, for example, develop a finer coding method to classify the PBC's policy stance (particularly when a long run of data is available), and investigate whether there is any difference between changes tightening policy and loosening policy, i.e., whether there is an asymmetric response by the PBC to changes in the state of the economy.