eric girardin - Academia.edu (original) (raw)

Papers by eric girardin

HAL (Le Centre pour la Communication Scientifique Directe), Apr 1, 2018

In a similar way to the stock market, the housing market in China has often been portrayed as hig... more In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai (Deng, Gyourko and Wu, 2012). However many observers and researchers argue that the fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on downward-biased official housing prices, this paper uses original high-frequency unit level residential price series for Beijing and Shanghai to test alternative hypotheses about the drivers of house price growth. We propose a sequential research strategy including the construction of hedonic prices, explosive unit root tests (Phillips, Shi and Yu, 2014), the filtering of microstructure noise (Bollerslev et al. 2015) and a Mixed Data Sampling (MIDAS) * We would like to thank Eric Ghysels and Bumjean Sohn for providing us the GARCH-MIDAS program to extract the long run volatility component used in this paper. The paper benefited from comments by an anonymous referee from HKIMR. Eric Girardin thanks HKIMR and Roselyne Joyeux AMSE for support from their respective visiting researcher programmes.

RePEc: Research Papers in Economics, May 1, 2015

We analyze how Brazilian financial markets, in particular futures interest rates, react to moneta... more We analyze how Brazilian financial markets, in particular futures interest rates, react to monetary policy both in terms of deeds, i.e. changes in the policy rate, and words, i.e. central bank communication. Using daily data from 2005 to 2014, we find that the futures interest rates react in the expected direction to both the central bank's actions and words, namely futures rates do increase (decrease) after both an increase in the reference interest rate and a hawkish (dovish) communication by the Banco Central do Brasil (BCB). We also find that BCB words create more "noise", since they generate an increased volatility of futures rates. Our analysis also reveals that monetary policy communication has increased its effectivenessmeasured by its larger impact on future rates and a reduced volatility-after the 2008 international crisis. At the same time, the deeds became less relevant as the effect of the changes in the SELIC rate on future rates has declined since then.

RePEc: Research Papers in Economics, Jan 15, 2011

Pegging in a coordinated way to a regional basket currency is considered by many as optimal for e... more Pegging in a coordinated way to a regional basket currency is considered by many as optimal for east-Asian countries. By contrast, according to existing empirical studies, these countries have most often relied on noncooperative United States dollar or G3 pegs. We show for the first time that by the late 1990s, with some reversals, a majority of east-Asian countries had already moved, de facto, away from the dollar peg and started targeting a basket, including east-Asian currencies (an "Asian Currency Unit"). Common-shock or market-based interpretations of such moves are ruled out since we document that, with few exceptions, countries in the region have in reality stuck to fixed exchange rates. We obtain such results using a Markov-switching estimation benchmarked against Bai-Perron structural break tests for the synthesis model of Frankel and Wei (2007), which augments the inference about currency weights in a basket with the weight on exchange-market pressure. In order to measure the latter, the forward positions of central banks in the foreign exchange market are taken into account.

RePEc: Research Papers in Economics, May 1, 2009

The views expressed in this paper are the views of the authors and do not necessarily reflect the... more The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

This study reviews the market intervention technique used by central banks for the management of ... more This study reviews the market intervention technique used by central banks for the management of exchange rate. In literature, enough evidence is available describing that many Central Banks used intervention as a tool to control the volatility of foreign exchange; however, recently the Central Banks in larger industrialized nations shifted from physical intervention policy to the oral intervention policy. The evidence suggests that the oral intervention remained more successful in controlling the volatility compared to physical intervention. JEL: F31, O24, E58 Article visualizations:

Economic Modelling, 2019

In this study, we investigate monthly seasonality in the foreign exchange market. Given the well-... more In this study, we investigate monthly seasonality in the foreign exchange market. Given the well-known recurrent higher returns in some month than in others in stock markets around the world, we consider it likely that a seasonal outperformance of a country's stock market over another is associated with similar seasonal patterns in capital flows and exchange rates. A seasonal profit (carry trade) opportunity can be created by the simultaneous appreciation of a country's currency and the outperformance of its stock market. By focusing on the world's key currency pairs, the US dollar-Deutsche mark and the US dollareuro, and by using a Markov-switching framework, we document persistent January and December effects in the foreign exchange market from 1971 to 2017. Analysis of the German-US stock returns differential and their bilateral capital flows reveal similar month effects in 65% of the whole sample.

Review of World Economics

Benchmarking IFS data with national data sources is not always possible. As highlighted by Jerven... more Benchmarking IFS data with national data sources is not always possible. As highlighted by Jerven (2016), some DECs adopt the IMF reporting standards for their domestic data collections; some other jurisdictions, however, use the IMF definitions and reporting standards only for reporting to the IMF while keeping a different official reporting domestically. That is, from a practical viewpoint, balance sheet banking data from national sources does not allow for crosscountry comparison due to the lack of harmonization. For example in the left-hand panel of Figure S1, we plot banking sector liquidity creation computed using national banks' published banking data for Albania and Chile and benchmark it with our A-BLC measure. The large gap observed in Albania is due to the sample used by the national statistical agency including not only depository institutions but also the central bank and other financial institutions. The negative liquidity creation observed before 2005 is mainly due to the large holding of government bonds by these institutions. In the case of Chile, instead, the central bank collects segmented balance sheet data on depository institutions only 1. However, the degree of segmentation is rather limited, as a number of balance sheet items such as central bank claims

Demystifying China’s Stock Market, 2019

The use of general descriptive names, registered names, trademarks, service marks, etc. in this p... more The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use.

Oxford 2001 meeting of the CEPR European Network on the Japanese Economy, at the Bank of England ... more Oxford 2001 meeting of the CEPR European Network on the Japanese Economy, at the Bank of England (CCBS) conference in honour of Max Fry, and at the Belfast MMF annual conference. We also thank Alistair Barr both for his comments and his providing data on all-industry output and the broad index of share prices. Comments by John Bonin and Marcel Aloy were also very helpful in improving the paper. However we remain solely responsible for all remaining errors.

Our paper attempts to enhance the understanding of China’s monetary policy rule, which may help e... more Our paper attempts to enhance the understanding of China’s monetary policy rule, which may help explain the country’s remarkable inflation performance over the past decade, in spite of the absence of explicit inflation targeting. In particular, we aim to shed light on the role of inflation in the conduct of monetary policy by the People’s Bank of China (PBC) in the New Millennium, when both the underlying economy and its monetary policy framework were transformed. We develop a new monetary policy index (MPI) in China by combining quantity, price and administrative instruments and estimate a hybrid (backward- and forward-looking), dynamic, discrete-choice model for the period 2002–13. Three main results arise from the paper. First, the Chinese monetary policy changes under PBC Governor Zhou from 2002 onwards have been relatively hawkish and smoothed. Second, the PBC appears to have built up a monetary policy framework similar to implicit flexible inflation targeting, with a hybrid re...

SSRN Electronic Journal, 2021

SSRN Electronic Journal, 2015

In a similar way to the stock market, the housing market in China has often been portrayed as hig... more In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai. However many observers and researchers argue that fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on the government housing prices which may suffer from a welldocumented downward bias, this paper uses original high-frequency unit price as well as transaction series for the residential resale housing markets of Beijing and Shanghai between January 2005 and December 2010 to test alternative hypotheses about housing prices volatility. We propose a sequential strategy in five steps integrating several techniques previously developed in a piecemeal and scattered way. First, we construct daily hedonic prices. Second, in order to search for the possible presence of bubbles on such high-frequency data, we propose using recently developed tests of an explosive root as an alternative to the unit root hypothesis. The third step is generated by the necessity of handling microstructure noise present at a daily frequency, thus filtering the raw data to extract a random walk component. The fourth step extracts a slowly changing monthly volatility component from the filtered daily hedonic real estate data. Finally, in so far as the presence of bubbles does not seem to characterize the residential housing market in major Chinese cities, such as Beijing and Shanghai, in a fifth step we show that fundamentals are able to explain slowly changing volatility, as well as transaction volumes in these first-tier cities.

Oxford Bulletin of Economics and Statistics, 2005

Monetary policy reaction functions are estimated for the UK over three periods-1985-90, 1992-97 a... more Monetary policy reaction functions are estimated for the UK over three periods-1985-90, 1992-97 and 1997-2003-in order to disentangle two effects: the switch from an emphasis on exchange rate stabilization to inflation targeting, and the introduction of instrument-independence in 1997. The external factors considered include US as well as German interest rates, and this leads to the identification of 'domestic' and 'international' models of the reaction function. The results suggest that it is the changes in the institutional arrangements rather than those in the targeting regime which have been decisive in the development of policy in this period.

SSRN Electronic Journal, 2020

This paper investigates how different monetary policy designs alter the effect of carry trades on... more This paper investigates how different monetary policy designs alter the effect of carry trades on a host small open economy. Capital inflows are expansionary, leading the central bank to raise the interest rate, increasing carry trades' returns, and generating further capital inflows (carry trades' vicious circle). This paper shows how monetary authorities can mitigate or suppress this vicious circle, when agents do not have full information about the central bank's objectives. The best way to deal with the destabilizing effect of carry trades is to target both inflation and capital inflows.

China has received massive foreign capital inflows after experiencing capital flight earlier in t... more China has received massive foreign capital inflows after experiencing capital flight earlier in the last decade. While the prior literature focuses on capital flight measures, this paper offers estimates of capital inflows into China through the misinvoicing of trade. In fact, the widely perceived undervalued Yuan has fueled expectations of a future revaluation of the Chinese currency. Despite the dramatic contraction in the current account surplus over the last few years, capital inflows have been very strong for much of the post-crisis period, leaving the total stock of foreign currency reserves at US$ 3.4 trillion.In a panel gravity modelling framework, we show that, China’s export and import prices for some commodities are sensitive to the non-deliverable forward exchange rate for the RMB in Hong-Kong. In light of the evolution of this rate, which has rather systemically reflected anticipated appreciations of the Chinese currency, it is contended that the persistent Chinese trad...

SSRN Electronic Journal, 2013

Central bank communication is becoming a key aspect of monetary policy as a consequence of financ... more Central bank communication is becoming a key aspect of monetary policy as a consequence of financial liberalization and the introduction of market instruments to conduct monetary policy. The objective of this paper is to assess whether China's money markets "listen" to the PBoC's messages and, possibly, whether they "understand" them.

This paper aims to enhance the understanding of China's monetary policy rule since the mid-19... more This paper aims to enhance the understanding of China's monetary policy rule since the mid-1990s, focusing on the role of inflation. It investigates the rule followed by the People's Bank of China (PBoC) by considering both the structural economic transformation of China and its evolving monetary policy framework. Our newly constructed monthly composite discrete monetary policy index (MPI), which combines price, quantity and administrative instruments, shows a change in style towards smoother but more contractionary policy moves from 2002 onwards. The estimation of a dynamic discrete-choice model a la Monokroussos (2011) implies that, from this point onwards, the conduct of monetary policy has been characterised by implicit inflation targeting. While the PBoC's behaviour up to 2001 was reminiscent of that in the inflation-accommodating G3 economies of the United States, euro area and Japan up to 1979, it has been characterized since 2002 by a policy rule similar to the p...

SSRN Electronic Journal

We find that futures rates increase (decrease) after both an increase in the reference interest r... more We find that futures rates increase (decrease) after both an increase in the reference interest rate and a hawkish (dovish) communication by the BCB. Moreover, BCB words create more noise, since they increase volatility of futures rates. Our analysis reveals that BCB communication has increased its effectiveness after the 2008 crisis, while deeds became less relevant.

Demystifying China’s Stock Market

The design and development of a financial system with Chinese characteristics have been dominated... more The design and development of a financial system with Chinese characteristics have been dominated by the government since the 1980s. The creation of the stock market is only one stage in that process. Three major features of such government domination are emphasized in this chapter. First, we will review the difficulties raised when trying to fit a stock market into a socialist market economy. We will consider the motivations behind the transformation in the channels of financing of the economy. While the initial move, in the mid-1980s, involved a shift of the financing of state-owned enterprises from government subsidies to bankintermediated financing, the subsequent move, in the early 1990s, marked a partial shift to direct financing, with the creation of the stock market. Second, we will present the major stages of development of the stock market, including the crucial step of Chinese-style privatization, involving the privatization of small-and medium-sized SOEs, sometimes with insider privatization, and the listing of large SOEs, leading much later to the split-share reform bringing the float closer to capitalization. Third, the heavy involvement of the government is strongly felt in new market creation, the creation and control of institutional investors and intermediaries, as well as the design and monitoring of the functioning of the market. External financial liberalization has been only very limited and gradual, relying on tightly controlled idiosyncratic schemes.

HAL (Le Centre pour la Communication Scientifique Directe), Apr 1, 2018

In a similar way to the stock market, the housing market in China has often been portrayed as hig... more In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai (Deng, Gyourko and Wu, 2012). However many observers and researchers argue that the fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on downward-biased official housing prices, this paper uses original high-frequency unit level residential price series for Beijing and Shanghai to test alternative hypotheses about the drivers of house price growth. We propose a sequential research strategy including the construction of hedonic prices, explosive unit root tests (Phillips, Shi and Yu, 2014), the filtering of microstructure noise (Bollerslev et al. 2015) and a Mixed Data Sampling (MIDAS) * We would like to thank Eric Ghysels and Bumjean Sohn for providing us the GARCH-MIDAS program to extract the long run volatility component used in this paper. The paper benefited from comments by an anonymous referee from HKIMR. Eric Girardin thanks HKIMR and Roselyne Joyeux AMSE for support from their respective visiting researcher programmes.

RePEc: Research Papers in Economics, May 1, 2015

We analyze how Brazilian financial markets, in particular futures interest rates, react to moneta... more We analyze how Brazilian financial markets, in particular futures interest rates, react to monetary policy both in terms of deeds, i.e. changes in the policy rate, and words, i.e. central bank communication. Using daily data from 2005 to 2014, we find that the futures interest rates react in the expected direction to both the central bank's actions and words, namely futures rates do increase (decrease) after both an increase in the reference interest rate and a hawkish (dovish) communication by the Banco Central do Brasil (BCB). We also find that BCB words create more "noise", since they generate an increased volatility of futures rates. Our analysis also reveals that monetary policy communication has increased its effectivenessmeasured by its larger impact on future rates and a reduced volatility-after the 2008 international crisis. At the same time, the deeds became less relevant as the effect of the changes in the SELIC rate on future rates has declined since then.

RePEc: Research Papers in Economics, Jan 15, 2011

Pegging in a coordinated way to a regional basket currency is considered by many as optimal for e... more Pegging in a coordinated way to a regional basket currency is considered by many as optimal for east-Asian countries. By contrast, according to existing empirical studies, these countries have most often relied on noncooperative United States dollar or G3 pegs. We show for the first time that by the late 1990s, with some reversals, a majority of east-Asian countries had already moved, de facto, away from the dollar peg and started targeting a basket, including east-Asian currencies (an "Asian Currency Unit"). Common-shock or market-based interpretations of such moves are ruled out since we document that, with few exceptions, countries in the region have in reality stuck to fixed exchange rates. We obtain such results using a Markov-switching estimation benchmarked against Bai-Perron structural break tests for the synthesis model of Frankel and Wei (2007), which augments the inference about currency weights in a basket with the weight on exchange-market pressure. In order to measure the latter, the forward positions of central banks in the foreign exchange market are taken into account.

RePEc: Research Papers in Economics, May 1, 2009

The views expressed in this paper are the views of the authors and do not necessarily reflect the... more The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of ADBI, the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.

This study reviews the market intervention technique used by central banks for the management of ... more This study reviews the market intervention technique used by central banks for the management of exchange rate. In literature, enough evidence is available describing that many Central Banks used intervention as a tool to control the volatility of foreign exchange; however, recently the Central Banks in larger industrialized nations shifted from physical intervention policy to the oral intervention policy. The evidence suggests that the oral intervention remained more successful in controlling the volatility compared to physical intervention. JEL: F31, O24, E58 Article visualizations:

Economic Modelling, 2019

In this study, we investigate monthly seasonality in the foreign exchange market. Given the well-... more In this study, we investigate monthly seasonality in the foreign exchange market. Given the well-known recurrent higher returns in some month than in others in stock markets around the world, we consider it likely that a seasonal outperformance of a country's stock market over another is associated with similar seasonal patterns in capital flows and exchange rates. A seasonal profit (carry trade) opportunity can be created by the simultaneous appreciation of a country's currency and the outperformance of its stock market. By focusing on the world's key currency pairs, the US dollar-Deutsche mark and the US dollareuro, and by using a Markov-switching framework, we document persistent January and December effects in the foreign exchange market from 1971 to 2017. Analysis of the German-US stock returns differential and their bilateral capital flows reveal similar month effects in 65% of the whole sample.

Review of World Economics

Benchmarking IFS data with national data sources is not always possible. As highlighted by Jerven... more Benchmarking IFS data with national data sources is not always possible. As highlighted by Jerven (2016), some DECs adopt the IMF reporting standards for their domestic data collections; some other jurisdictions, however, use the IMF definitions and reporting standards only for reporting to the IMF while keeping a different official reporting domestically. That is, from a practical viewpoint, balance sheet banking data from national sources does not allow for crosscountry comparison due to the lack of harmonization. For example in the left-hand panel of Figure S1, we plot banking sector liquidity creation computed using national banks' published banking data for Albania and Chile and benchmark it with our A-BLC measure. The large gap observed in Albania is due to the sample used by the national statistical agency including not only depository institutions but also the central bank and other financial institutions. The negative liquidity creation observed before 2005 is mainly due to the large holding of government bonds by these institutions. In the case of Chile, instead, the central bank collects segmented balance sheet data on depository institutions only 1. However, the degree of segmentation is rather limited, as a number of balance sheet items such as central bank claims

Demystifying China’s Stock Market, 2019

The use of general descriptive names, registered names, trademarks, service marks, etc. in this p... more The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use.

Oxford 2001 meeting of the CEPR European Network on the Japanese Economy, at the Bank of England ... more Oxford 2001 meeting of the CEPR European Network on the Japanese Economy, at the Bank of England (CCBS) conference in honour of Max Fry, and at the Belfast MMF annual conference. We also thank Alistair Barr both for his comments and his providing data on all-industry output and the broad index of share prices. Comments by John Bonin and Marcel Aloy were also very helpful in improving the paper. However we remain solely responsible for all remaining errors.

Our paper attempts to enhance the understanding of China’s monetary policy rule, which may help e... more Our paper attempts to enhance the understanding of China’s monetary policy rule, which may help explain the country’s remarkable inflation performance over the past decade, in spite of the absence of explicit inflation targeting. In particular, we aim to shed light on the role of inflation in the conduct of monetary policy by the People’s Bank of China (PBC) in the New Millennium, when both the underlying economy and its monetary policy framework were transformed. We develop a new monetary policy index (MPI) in China by combining quantity, price and administrative instruments and estimate a hybrid (backward- and forward-looking), dynamic, discrete-choice model for the period 2002–13. Three main results arise from the paper. First, the Chinese monetary policy changes under PBC Governor Zhou from 2002 onwards have been relatively hawkish and smoothed. Second, the PBC appears to have built up a monetary policy framework similar to implicit flexible inflation targeting, with a hybrid re...

SSRN Electronic Journal, 2021

SSRN Electronic Journal, 2015

In a similar way to the stock market, the housing market in China has often been portrayed as hig... more In a similar way to the stock market, the housing market in China has often been portrayed as highly speculative, giving rise to "bubble" concerns. Over the last decade, residential prices increased every year on average by double digits in Beijing or Shanghai. However many observers and researchers argue that fundamentals of the housing sector, both sector-specific and macroeconomic, may have been the driving force behind housing price volatility. While existing empirical work exclusively relies on the government housing prices which may suffer from a welldocumented downward bias, this paper uses original high-frequency unit price as well as transaction series for the residential resale housing markets of Beijing and Shanghai between January 2005 and December 2010 to test alternative hypotheses about housing prices volatility. We propose a sequential strategy in five steps integrating several techniques previously developed in a piecemeal and scattered way. First, we construct daily hedonic prices. Second, in order to search for the possible presence of bubbles on such high-frequency data, we propose using recently developed tests of an explosive root as an alternative to the unit root hypothesis. The third step is generated by the necessity of handling microstructure noise present at a daily frequency, thus filtering the raw data to extract a random walk component. The fourth step extracts a slowly changing monthly volatility component from the filtered daily hedonic real estate data. Finally, in so far as the presence of bubbles does not seem to characterize the residential housing market in major Chinese cities, such as Beijing and Shanghai, in a fifth step we show that fundamentals are able to explain slowly changing volatility, as well as transaction volumes in these first-tier cities.

Oxford Bulletin of Economics and Statistics, 2005

Monetary policy reaction functions are estimated for the UK over three periods-1985-90, 1992-97 a... more Monetary policy reaction functions are estimated for the UK over three periods-1985-90, 1992-97 and 1997-2003-in order to disentangle two effects: the switch from an emphasis on exchange rate stabilization to inflation targeting, and the introduction of instrument-independence in 1997. The external factors considered include US as well as German interest rates, and this leads to the identification of 'domestic' and 'international' models of the reaction function. The results suggest that it is the changes in the institutional arrangements rather than those in the targeting regime which have been decisive in the development of policy in this period.

SSRN Electronic Journal, 2020

This paper investigates how different monetary policy designs alter the effect of carry trades on... more This paper investigates how different monetary policy designs alter the effect of carry trades on a host small open economy. Capital inflows are expansionary, leading the central bank to raise the interest rate, increasing carry trades' returns, and generating further capital inflows (carry trades' vicious circle). This paper shows how monetary authorities can mitigate or suppress this vicious circle, when agents do not have full information about the central bank's objectives. The best way to deal with the destabilizing effect of carry trades is to target both inflation and capital inflows.

China has received massive foreign capital inflows after experiencing capital flight earlier in t... more China has received massive foreign capital inflows after experiencing capital flight earlier in the last decade. While the prior literature focuses on capital flight measures, this paper offers estimates of capital inflows into China through the misinvoicing of trade. In fact, the widely perceived undervalued Yuan has fueled expectations of a future revaluation of the Chinese currency. Despite the dramatic contraction in the current account surplus over the last few years, capital inflows have been very strong for much of the post-crisis period, leaving the total stock of foreign currency reserves at US$ 3.4 trillion.In a panel gravity modelling framework, we show that, China’s export and import prices for some commodities are sensitive to the non-deliverable forward exchange rate for the RMB in Hong-Kong. In light of the evolution of this rate, which has rather systemically reflected anticipated appreciations of the Chinese currency, it is contended that the persistent Chinese trad...

SSRN Electronic Journal, 2013

Central bank communication is becoming a key aspect of monetary policy as a consequence of financ... more Central bank communication is becoming a key aspect of monetary policy as a consequence of financial liberalization and the introduction of market instruments to conduct monetary policy. The objective of this paper is to assess whether China's money markets "listen" to the PBoC's messages and, possibly, whether they "understand" them.

This paper aims to enhance the understanding of China's monetary policy rule since the mid-19... more This paper aims to enhance the understanding of China's monetary policy rule since the mid-1990s, focusing on the role of inflation. It investigates the rule followed by the People's Bank of China (PBoC) by considering both the structural economic transformation of China and its evolving monetary policy framework. Our newly constructed monthly composite discrete monetary policy index (MPI), which combines price, quantity and administrative instruments, shows a change in style towards smoother but more contractionary policy moves from 2002 onwards. The estimation of a dynamic discrete-choice model a la Monokroussos (2011) implies that, from this point onwards, the conduct of monetary policy has been characterised by implicit inflation targeting. While the PBoC's behaviour up to 2001 was reminiscent of that in the inflation-accommodating G3 economies of the United States, euro area and Japan up to 1979, it has been characterized since 2002 by a policy rule similar to the p...

SSRN Electronic Journal

We find that futures rates increase (decrease) after both an increase in the reference interest r... more We find that futures rates increase (decrease) after both an increase in the reference interest rate and a hawkish (dovish) communication by the BCB. Moreover, BCB words create more noise, since they increase volatility of futures rates. Our analysis reveals that BCB communication has increased its effectiveness after the 2008 crisis, while deeds became less relevant.

Demystifying China’s Stock Market

The design and development of a financial system with Chinese characteristics have been dominated... more The design and development of a financial system with Chinese characteristics have been dominated by the government since the 1980s. The creation of the stock market is only one stage in that process. Three major features of such government domination are emphasized in this chapter. First, we will review the difficulties raised when trying to fit a stock market into a socialist market economy. We will consider the motivations behind the transformation in the channels of financing of the economy. While the initial move, in the mid-1980s, involved a shift of the financing of state-owned enterprises from government subsidies to bankintermediated financing, the subsequent move, in the early 1990s, marked a partial shift to direct financing, with the creation of the stock market. Second, we will present the major stages of development of the stock market, including the crucial step of Chinese-style privatization, involving the privatization of small-and medium-sized SOEs, sometimes with insider privatization, and the listing of large SOEs, leading much later to the split-share reform bringing the float closer to capitalization. Third, the heavy involvement of the government is strongly felt in new market creation, the creation and control of institutional investors and intermediaries, as well as the design and monitoring of the functioning of the market. External financial liberalization has been only very limited and gradual, relying on tightly controlled idiosyncratic schemes.