ABSTRACT
This study is the first attempt to apply TVP-VAR model to analyse the effects of China’s monetary shocks on macroeconomic variables. 3D impulsive response functions indicate that monetary shocks did affect GDP, CPI and exchange rate over 1996Q1-2016Q4 either in short-run or long-run in China. Our study has important policy implications for the Chinese government conducting monetary policy to sustain its economic growth and maintain economic stability.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1 Data are from National Bureau of Statistics of China.
2 We do not find any cointegration among our four variables. Results are available upon request.
3 The impulse-response analyses require a choice of Cholesky order. The Cholesky orders for the models were set by M2->Interest Rate->Exchange Rate->GDP.
4 Details regarding the estimation, transformation, and setting of the prior for the time variation of the coefficients such as(training sample), and , see Franta, Horvath, and Rusnak (Citation2014).