Home >> Working Paper
Words or Actions?—The optimal monetary policy communication in China
Read        DownLoad
TitleWords or Actions?—The optimal monetary policy communication in China  
AuthorLu Zhen and Lin Bingxuan  
OrganizationSchool of Finance, Zhongnan University of Economics and Law;College of Business Administration, University of Rhode Island; 
Key WordsOptimal Communication; Monetary Policy; Bounded Rationality 
AbstractThis paper incorporates bounded rationality in a simple New Keynesian model to investigate the optimal communication. The model gives the conditions for central bank communication. It also describes the characteristics of optimal communication signals. Because the China’s economy is government-dominated, we show that conditions for communication are easily satisfied and the effect of the communication is more significant in China, so the central bank of China should pay more attention to communication. Using Chinese data, we empirically show that the effect of monetary policy communication is positively related to the supply shock, the consistency between implementation and communication of monetary policy and the inflation. This result supports our analysis. 
Serial NumberWP280 
  • Institute of Economics, Chinese Academy of Social Sciences
  • Copyright Economic Research Journal
  • The uploaded articles by this website express the authors’ views, not necessarily the views of this website.
  • Perennial Legal Counsel: Lu Kang (Chong Guang Law Office)
  • ISSN 0577-9154 CN 11-1081/F Postal Distribution Code 2-25l (Domestic) M16 (Overseas)
  • ICP 10211437 (Beijng)
  • No.2,Yuetan Bei Xiaojie, Xicheng District, Beijing 100836, P. R. China
  • Phone/Fax: (+8610) 68034153