Current Research


Published Papers


Can You Hear Me Now? Identifying the Effect of Chinese Monetary Policy Announcements

Published in Journal of International Money and Finance, 2024

Abstract: Do Chinese monetary policy announcements matter? This study evaluates how relevant Chinese monetary policy announcements are to Chinese financial markets and the real side of the economy. Chinese monetary policy is identified by estimating a “target” factor measuring policy surprises and a “path” factor measuring future expectations of policy using price changes to Chinese financial derivatives on policy announcement dates. Local projection results show that 1) Chinese Treasury yields and interbank rates respond persistently, suggesting that policy transmission through an interest-rate channel exists; 2) Equities and exchange rates do not respond to policy announcements instantaneously, but with a lag; 3) Future expectations of Chinese monetary policy play a larger role than surprises, 4) Real variables show evidence of policy transmission, and 5) policy transmission may be sticky due to information frictions.

Recommended Citation: Shieh, Harrison. (2024). “Can You Hear Me Now? Identifying the Effect of Chinese Monetary Policy Announcements.” Journal of International Money and Finance. Vol. 144.

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Working Papers


Journey to the (North, South, East, and) West: Global Spillovers of Chinese Monetary Policy

Joint w/ Anirban Sanyal. Working Paper, 2024.

Abstract: We characterize and evaluate how Chinese monetary policy shocks are transmitted globally by examining the role production linkages play in Chinese monetary policy shock transmission through global stock returns. Using a spatial autoregression with identified monetary policy shocks, we explore how Chinese monetary policy propagate both upstream and downstream through supply chains. Firms on both ends of the Chinese production network show negative country-industry level equity returns in response to a contractionary monetary policy shock. Notably, most of the observed equity responses to monetary policy shocks can be attributed to the network effect of firms being connected across global supply chains, highlighting China’s importance in supply chains. We attribute the heterogeneity in equity responses across countries and industries to a country’s degree of home-bias by simulating a standard small-open economy model with supply chain integration. Our results reveal the importance supply chains play in the transmission of Chinese monetary policy.

Recommended Citation: Sanyal, Anirban and Harrison Shieh. (2024). “Journey to the (North, South, East, and) West: Global Spillovers of Chinese Monetary Policy.” Working Paper.

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What They Do in the Shadows: Chinese Shadow Credit Growth and Monetary Policy

UC Santa Cruz CAFIN Working Paper No. 2216, 2021.

Abstract: This study seeks to evaluate the effect of Chinese monetary policy shocks on credit creation through the shadow banking sector in Mainland China. Identification is achieved by constructing a measure of monetary policy surprises based on changes to the 1-Year Interest Rate Swaps on the 7-Day Repo Rate on monetary policy announcement dates. A two-stage local projection was then estimated, using the surprise measure as an instrument. The results give two key findings: 1) shadow credit expands in response to contractionary monetary policy, and 2) there is additional evidence of the transmission of monetary policy through the interest rate channel

Recommended Citation: Shieh, Harrison. (2021). “What They Do in the Shadows: Chinese Shadow Credit Growth and Monetary Policy.” UC Santa Cruz CAFIN Working Paper No. 2216.

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