Taking Away the Ladle
Smoothing investment fluctuations is a priority for central banks around the world. The People’s Bank of China (PBoC) is no exception. Its approach to macro-management is fundamentally different from that of its Western counterparts, however. The state’s dominant role in investment decision making and China’s inflexible foreign exchange rate regime make it difficult for the PBoC to use interest rate policy effectively. It must instead rely on more unconventional strategies to mitigate booms and busts.
KeywordsMonetary Policy Central Bank Commercial Bank Money Supply Lending Rate
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