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Double Financial Accelerators and Chinese Monetary Policy
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TitleDouble Financial Accelerators and Chinese Monetary Policy  
AuthorZhao Fuyang, Wang Chan and Gong Liutang  
OrganizationGuanghua School of Management, Peking University;School of Finance, Central University of Finance and Economics;; 
Key WordsFinancial Intermediary; Land; Double Financial Accelerators; Monetary Policy 
AbstractBased on the Chinese data between 2009-2016, we find strong positive co-movements between land/real estate market and financial market. We build a DSGE model with financial intermediary and land/real estate market. We also introduce the financial frictions in Gertler & Karadi (2011) and Kiyotaki & Moore (1997). The two types of financial frictions constitute double financial accelerators. We assume there exists correlations between housing demand shock and monetary policy shock, which weakens the importance of the former and increases the importance of the later. We estimate the model using the Bayesian method, find the positive correlation between the housing demand shock and monetary policy shock, and identify the credit policy shock to be the main driving force of the economic fluctuations. Lastly, we compare the two monetary policies, and find that the credit policy instead of the interest rate policy, is the main Chinese monetary policy. 
Serial NumberWP1415 
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