Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5087672 | Journal of Asian Economics | 2009 | 12 Pages |
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
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Authors
Ying Wu,