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Targets: Why Money and Credit?

  • Michael BeggsEmail author
  • Luke Deer
Chapter
  • 134 Downloads

Abstract

The People’s Bank of China was not very explicit about its views on the transmission processes of monetary policy in the 2000s, but its statements were oriented around money and credit quantity targets. This contrasted with international ‘new macroeconomic consensus’ policy, which focused on interest rates. We explain why Chinese officials continued to use quantitative targets: mainly as an anchor for tighter policy, rather than any belief in a stable demand-for-money function. Interest rates were not appropriate as an intermediate target because policymakers doubted their influence on investment.

Keywords

Monetary policy China Central banking Money Credit Targets 

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Copyright information

© The Author(s) 2019

Authors and Affiliations

  1. 1.Political EconomyUniversity of SydneySydneyAustralia
  2. 2.FinanceUniversity of SydneySydneyAustralia

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