Article ID Journal Published Year Pages File Type
5087672 Journal of Asian Economics 2009 12 Pages PDF
Abstract

This paper provides a cointegration analysis of incomplete monetary sterilization and autonomy in China when both financial controls and the exchange rate peg exist. According to an estimated long-run equilibrium relation, only 35 cents are sterilized for a yuan of foreign-exchange reserve that flows into China. In response to the movement in foreign-exchange reserves, M2 proves more endogenous than M1; and in the M2 elasticity model, as the forecast horizon extends, the domestic-credit component of the monetary base exhibits its significant endogeneity with respect to the foreign-asset component, whereas the endogeneity of the foreign-asset component also rises with respect to M2.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
,