• Title/Summary/Keyword: China's Monetary Policy

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A Study on the Impact of China's Monetary Policy on South Korea's Exchange Rate

  • He, Yugang
    • The Journal of Industrial Distribution & Business
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    • v.9 no.6
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    • pp.15-24
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    • 2018
  • Purpose - The adjustment of one country's monetary policy can cause the macroeconomic change of other countries. Due to this, this paper attempts to analyze the impact of China's monetary policy on South Korea's exchange rate. Research design, data, and methodology - Based on the flexible-price monetary model, sets of annual time series from 1980 to 2017 are employed to perform an empirical estimation. The vector error correction model is also used to exploit the short-run relationship between both of them. Of course, the South Korea's real GDP, the China's real GDP, South Korea's interest rate, the South Korea's interest rate and the South Korea's monetary supply are treated as independent variables in this paper. Result - The long-run findings reveal that the China's money supply has a negative effect on South Korea's exchange rate. Respectively, the short-run findings depicts that the China's money supply has negative a effect on South Korea's exchange rate. Of course, other variables selected in this paper also have an effect on South Korea's exchange rate whatever positive or negative. Conclusions - As the empirical evidence shows, the China's monetary policy has a negative effect on South Korea's exchange rate whenever in the long run or in the short run.

Transmission of Chinese Monetary Policy Shocks: Evidence from Korea (중국 통화정책 변화가 한국에 미치는 영향)

  • Cho, Yujeong
    • Economic Analysis
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    • v.27 no.4
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    • pp.43-69
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    • 2021
  • As the trade linkages and the financial relationship between China and Korea grow stronger, China's influence on Korea is also growing larger. Therefore, it is meaningful to examine key features of Chinese monetary policy operations and the current situation, and to analyze the transmission mechanism of China's monetary policy shocks onto the Korea economy. China's monetary policy shocks can have an impact on the Korea economy through the trade, financial and oil-price channels. In the trade channel, an expansionary Chinese monetary policy can increase Korea's exports of intermediate goods to China under the vertical trade structure, via the vertical trade integration effect. Meanwhile, the expenditure switching effect and the income demand effect show no statistical significance. In the financial and oil-price channels, expansionary Chinese monetary policy shocks can decrease the interest rate and increase both stock prices and the consumer price index in Korea through changes in global portfolio capital flows, interest rates, and raw material prices.

Evolution of China's Economy and Monetary Policy: An Empirical Evaluation Using a TVP-VAR Model

  • Kim, Seewon
    • East Asian Economic Review
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    • v.25 no.1
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    • pp.73-97
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    • 2021
  • China has experienced many structural changes in the process of economic development over the past three decades. Using a time-varying parameter VAR model with stochastic volatility and mixture innovations, this study investigates whether such structural changes in, especially tools and operational aims of monetary policy, affect the monetary transmission mechanism. We find that impulse responses of output growth and inflation to monetary shocks have substantially increased and then reversed to decrease around 2005-2006. This time variation is mainly caused by changes in the monetary transmission mechanism, i.e., the manner in which main macroeconomic variables respond to policy shocks, rather than by changes in volatilities of exogenous shocks. The result implies that aggressive monetary policy to facilitate economic growth in the developing economies may be legitimized, unless it causes inflation seriously.

Two-Sided Mirror: An Analysis of Inflation's Dual Impact on China's Economic Growth

  • Ke Chen;Jongheuk Kim
    • East Asian Economic Review
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    • v.28 no.2
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    • pp.175-219
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    • 2024
  • This study investigates the impact of inflation rate fluctuations on economic growth in China, with a particular focus on potential non-linear characteristics. The global economic impact of the COVID-19 pandemic notably heightens the study's relevance. The research that the unidirectional causal relationship from inflation to economic growth in China first strengthens and then weakens over time. Furthermore, there is an inflation rate threshold effect on economic growth, identified at 2%. Below this threshold, inflation positively influences economic growth, whereas above it, the impact turns negative. This finding underscores the importance of balancing economic growth with inflation control in the formulation of monetary policy.

International Transmission of Macroeconomic Uncertainty in China: A Time-varying Bayesian Global SVAR Approach

  • Wongi Kim
    • East Asian Economic Review
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    • v.28 no.1
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    • pp.95-140
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    • 2024
  • This study empirically investigates the international transmission of China's uncertainty shocks. It estimates a time-varying parameter Bayesian global structural vector autoregressive model (TVP-BGVAR) using time series data for 33 countries to evaluate heterogeneous international linkage across countries and time. Uncertainty shocks are identified via sign restrictions. The empirical results reveal that an increase in uncertainty in China negatively affects the global economy, but those effects significantly vary over time. The effects of China's uncertainty shocks on the global economy have been significantly altered by China's WTO accession, the global financial crisis, and the recent US-China trade conflict. Furthermore, the effects of China's uncertainty shocks, typically on inflation, differ significantly across countries. Moreover, Trade openness appears crucial in explaining heterogeneous GDP responses across countries, whereas the international dimension of monetary policy appears to be important in explaining heterogeneous inflation responses across countries.

Monetary Regionalism and North-east Asian Economic Base (동북아 경제중심에 대한 금융적 지역주의 접근)

  • 박석근
    • Journal of Korea Port Economic Association
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    • v.19 no.2
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    • pp.177-202
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    • 2003
  • Balassian Approach of regional economic integration has been mainly aimed at improving conditions for regional trade since 1960s. After the financial crises of the late 1990s, however, the theoretical approach to regional integration will have to be a different one as regionalism have to offer enhanced protection against crises. The aim of this paper, above all, is to provide a theoretical framework for the emerging new monetary regionalism. Regions that wish to strengthen their co-operation in monetary and financial affairs today have the option of monetary regionalism without trade agreement. East Asian region will become an increasingly important domain within which to explore enhanced protection against financial crises. And as Korea seems to play a crucial role in building regional integration among ASEAN+3(Korea, China and Japan) countries, alternative policy for Korean economy to be the North-east Asian Economic Base need to be schemed on the basis of Balassian as well as monetary regionalism.

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China's Perception on U.S. and Foreign Policy Strategy after the Global Financial Crisis (중국의 대미인식과 대외전략 논의: 2008년 글로벌 금융위기 이후)

  • Kang, Taek-Goo;Han, SukHee
    • Journal of International Area Studies (JIAS)
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    • v.15 no.2
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    • pp.51-68
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    • 2011
  • The purpose of this paper is to review China's perception on the U.S. power after the global financial crisis. Although economic power of U.S. was declined by the global financial crisis, U.S. hegemony in the international order still maintains. Gap of national power between U.S. and China may be narrow because of decline of U.S. economic power. It can be predicted China will push a policy that secures an initiative of reform in the global monetary system and is going to take a more cooperative policy without U.S. hegemony power harming China's core interests.

Effect of the U.S. Monetary Policy on the Real Economy of the Asia: Focusing on the impact of the exchange rate in Korea, China and Japan (미국의 통화정책이 아시아 실물경제에 미치는 영향: 한국, 중국, 일본의 환율충격을 중심으로)

  • Choi, Nam-Jin
    • International Area Studies Review
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    • v.20 no.2
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    • pp.3-23
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    • 2016
  • In this study, we used actual proof analysis, based on SVAR model according to economy theory, to observe the impact of actual and financial market of Korea, Japan, and China that have adopted quantitative easing export based strategy of growth, an unconventional monetary policy of the U.S. As a result of estimation, it appears that real effective exchange rate rise shock of Korea, Japan, and China against U.S. dollar has a negative influence on current account and index of industrial product, which are real economy. It can be implied that the result is driven from the fact that strong home currency of Korea, Japan, and China decreases price competitiveness of exports, causing negative influence on real economy. The real effective exchange rate shock against U.S. dollar appeared to decrease national bond rate of Korea and Japan, while increasing that of China. In instances of Korea and Japan, it is implied that national bond rate decreases as foreigner investment funds flow in, considering foreign-exchange profit through advanced financial market with high opening extent. On the other hand, because there are strong regulation on opening extent of Chinese financial markets, the influence seems to be greater for domestic policy, rather than a foreign influence. Lastly, Korea showed a more dramatic variable reaction to exchange rate shock compared to Japan or China. It is implied from the result that Korea is relatively more susceptible and fragile in regards of international status of economic size and currency.

International Inflation Synchronization and Implications

  • CHON, SORA
    • KDI Journal of Economic Policy
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    • v.42 no.2
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    • pp.57-84
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    • 2020
  • This study analyzes global inflation synchronization and derives policy implications for the Korean economy. Unlike previous studies that assume a single global inflation factor, this study investigates if inflation in Korea can be explained further by other global inflation factors. Our principal component analysis provides three principal components for global inflation that are linked to the Korea inflation rate - the first component is closely related to OECD inflation, and the second and third components reflect China's inflation. This study empirically demonstrates via in-sample fitting and out-of-sample forecasting that the three principal components of global inflation play a significant role in explaining and predicting Korean inflation in the short-term, while their role is limited in the mid-term. Domestic macroeconomic variables are found to be more important for the mid-term movements of the Korean inflation rate. The empirical results here suggest that the Bank of Korea should focus more on domestic economic conditions than on global inflation when implementing monetary policy because global factors are likely to be already reflected in domestic macro-variables in the mid-term.

Analysis of China's trade dependency on the countries participating in the Belt and Road initiative (일대일로 참여국가에 대한 중국의 무역 의존성 분석과 시사점)

  • Song, Min-Geun
    • Journal of Digital Convergence
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    • v.15 no.9
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    • pp.189-200
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    • 2017
  • The purpose of this study is to identify the characteristics of China's trade relationships with and dependency on the countries participating in the Belt and Road initiative and to present some implications. This study collected annual total imports, exports, and GDP data from the International Monetary Fund (IMF) on 198 countries and the National Bureau of Statistics of China (NBS) on 221 countries from 1995 to 2015. China's imports and exports have expanded considerably from the mid-1990s to the present, and China's dependence on imports and exports with the US and Japan has declined, while its dependence on the Middle East, South Africa, South America, and Southeast Asia has increased. China has a very high level of dependence on imports from and exports to the countries participating in the Belt and Road initiative, and as the Belt and Road project progresses, the mutual trade dependency between China and the other participating countries is expected to strengthen and expand.