Effects and Conduct of Macroprudential Policy in China

This working paper was written by Soyoung Kim (Seoul National University), Seri Shim (Bank of Korea) and Hongyi Chen (Hong Kong Institute for Monetary and Financial Research).This paper investigates the effects and conduct of macroprudential policies in China in comparison with those of monetary policy. Two types of structural VAR models, one with recursive zero restrictions and the other with sign restrictions on impulse responses, are employed with monthly data. The main results of this paper are as follows. First, macroprudential policy has substantial effects on financial variables such as credit and house prices and macro variables such as output and inflation rate, as monetary policy does. Second, in response to credit shocks, contractionary macroprudential policy is taken to stabilise credit, but monetary policy is not