From a Quantity to an Interest Rate-Based Framework: Multiple Monetary Policy Instruments and Their Effects in China

This paper investigates the effects of various monetary policy instruments in China with the structural vector autoregression model. Empirical results are as follows. The effects of benchmark lending rate and short-term interest rate shocks are larger than those of reserve requirement ratio shocks. Nonpolicy shocks exert substantial effects on intermediate targets under a quantity-based policy framework. The size and effects of short-term interest rate shocks in recent years are large. Short-term interest rate shocks have strong effects on property prices. These results suggest that the new interest rate-based policy framework is more effective than the previous quantity-based policy framework.