October 26th, 2020

Discussion Paper 2020/5 is now available: El-Shagi, M. / Jiang, L. / Zhang, L..:  One Country - Two Monetary Policies: Evidence from a new indicator of the PBoC´s monetary policy support for poor regions

Abstract:

In recent years, one of the PBoC′s major issues was to avoid a generally conservative monetary policy that would jeopardize the central government′s poverty-alleviation strategy by limiting credit supply in rural areas where it is already scarce. We develop a range of new indicators to measure those aspects of the PBoC′s policy and demonstrate that the PBoC has successfully implemented policies targeted at poor counties. That is, we show that a central bank has the general potential to address regional diversity and distributional issues.

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October 20th, 2020

Discussion Paper 2020/4 is now available: El-Shagi, M. / Zheng, Y.: Money Demand: A Pseudo-Metastudy

Abstract:

In this paper, we provide conclusive evidence on the role of measurement and estimation techniques in money demand estimation. Over the past few decades, there have been 100s of papers assessing money demand in the main economies of the globe. We develop a pseudo-metastudy framework where, based on modeling choices found in the literature, we estimate thousands of different specifications for the US, China, the UK and the Euro area, allowing us to assess what has driven the diverging results in the previous literature.

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May 25th, 2020

Discussion Paper 2020/3 is now available: Tong, B. / Yang, G.: Interest Rate Pegging, Fluctuations and Fiscal Policy in China

Abstract:

This paper proves in a New Keynesian model that interest rate pegging can explain the unusual business cycle fluctuations in China. It is traditional wisdom that when the nominal interest rate is inflexible, there is no unique equilibrium in macroeconomic models. We prove that a unique equilibrium exists if the nominal rate is pegged for a limited period, after which it switches to a flexible rate regime.The peg alters the propagation of external shocks, magnifies volatility of endogenous variables, and leads to instability of the economy. Besides, the model becomes more unstable when the peg duration extends, and when the pegged rate deviates from steady state. At the same time, fiscal multiplier increases under the peg, indicating fiscal policy may be more effective in mitigating economic fluctuations when monetary policy is restricted by interest rate pegging.

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Special Issue in Economic Systems

February 1st, 2020

We are excited to announce that the CFDS is organizing its second special issue under the umbrella of the BRICS Network University (BRICS NU). This time a Symposium (a collection of roughly half a dozen thematically matching papers in one issue) will be published in Economic Systems on the topic "Economic Growth and Development in the BRICS". Submission Deadline is June 30th, 2020. 

Call for Papers

November 5th, 2019

Discussion Paper 2019/9 is now available: Chen, Y. / Jiang, L.: Liquidity Risk and Corporate Bond Yield Spread: Evidence from China?

Abstract:

This paper investigates the contribution of liquidity risk to Chinese corporate bond spreads. We calculate corporate bond spreads based on the full treasury yield curve and establish a set of liquidity measures of the Chinese corporate bonds. Our empirical study shows that liquidity premium accounts for a relatively smaller portion of corporate bond spread in China, although the market liquidity is low and corporate bond issuers are strictly pre-screened. These findings are interesting, as the developed markets have better liquidity and less pre-issuance restriction, and liquidity premium still explains a relatively larger portion of corporate bond spread. Besides, we also explore the determinants of Chinese corporate bond liquidity and default premiums.

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