Stefan Angrick (Asian Development Bank Institute): The transition of monetary policy in Japan and China: From quantities to prices

Stefan Angrick (Asian Development Bank Institute): The transition of monetary policy in Japan and China: From quantities to prices

Co-author: Naoyuki Yoshino (Asian Development Bank Institute)

Abstract

Whereas monetary policy in major advanced economies has
traditionally focused on management of the interbank overnight rate by an independent central bank pursuing an inflation target, monetary policy in many emerging market economies is characterised by quantity-based measures and involves multiple layers of agency. Chinese monetary policy, like Japanese monetary policy before it, reflects this transition from quantitative credit controls towards price-based instruments and targets. This paper analyses this transition by focussing on the role of window guidance in Japanese and Chinese monetary policy. We draw on historical window guidance statistics published in Japan and we apply computational linguistic methods to capture the tone of window guidance-related statements in official policy reports in China. Using this data, we estimate Structural Vector Autoregressive (SVAR) models to investigate the effectiveness of window guidance vis-à-vis other policy tools.

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