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China's financial prices are informative enough for the PBC to introduce a monetary policy framework centered around interest rates. While bond yields are not fully efficient?reflecting regulation, liquidity, and segmentation?we find they contain considerable information about the state of the economy as well as evidence of an emerging transmission channel: changes in PBC rates influence the structure of Treasury, financial, and corporate bond yield curves, which are then associated with changes in growth and inflation. Coporate spreads are also a leading indicator of growth and inflation. While further liberalization will strengthen both efficiency and transmission, several necessary elements to move towards indirect monetary policy are already in place.

Interest rates --- Econometric models. --- Banks and Banking --- Investments: Commodities --- Finance: General --- Inflation --- Investments: Bonds --- Interest Rates: Determination, Term Structure, and Effects --- Financial Markets and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Price Level --- Deflation --- Finance --- Investment & securities --- Macroeconomics --- Yield curve --- Securities markets --- Arbitrage --- Bonds --- Financial services --- Financial markets --- Commodities --- Prices --- Financial institutions --- Capital market --- Financial instruments --- China, People's Republic of

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What might interest rate liberalization do to intermediation and the cost of capital in China? China's most binding interest rate control is a ceiling on the deposit rate, although lending rates are also regulated. Through case studies and model-based simulations, we find that liberalization will likely result in higher interest rates, discourage marginal investment, improve the effectiveness of intermediation and monetary transmission, and enhance the financial access of underserved sectors. This can occur without any major disruption. International experience suggests, however, that achieving these benefits without unnecessary instability, requires vigilant supervision, governance, and monetary policy, and a flexible policy toolkit.

Finance --- Business & Economics --- Banking --- Interest rates --- Monetary policy --- Government policy --- Money market rates --- Rate of interest --- Rates, Interest --- Interest --- Banks and Banking --- Industries: Financial Services --- Money and Monetary Policy --- Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection --- Interest Rates: Determination, Term Structure, and Effects --- Central Banks and Their Policies --- Information and Market Efficiency --- Event Studies --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Deposit rates --- Interbank rates --- Loans --- Commercial banks --- Financial services --- Financial institutions --- Interest rate policy --- Banks and banking --- China, People's Republic of

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Global imbalances have been a central theme of the international economic policy debate for much of the last decade, prompted by large and sustained current account deficits in the U.S. and counterpart surpluses in China, Germany, and among many of the oil producers. This paper focuses on the current state of the external imbalance in China, examining the factors underlying the post-2008 drop in China’s current account surplus and analyzing the prospects for the external surplus going forward. The paper finds that China’s current account surplus should remain modest in the coming years. However, despite the fact that China’s medium-term current account is likely to stay below its pre-crisis range, it is too early to conclude that "rebalancing" has been truly achieved in China. While imbalances do not currently seem to be manifesting themselves as a feature of China’s external accounts, the evidence increasingly points to a rising domestic imbalance as growth becomes increasingly dependent on very high levels of investment.

Balance of payments --- Current account balance (International trade) --- International payments, Balance of --- Foreign exchange --- Terms of trade --- Balance of trade --- International liquidity --- Econometric models. --- China --- Economic conditions. --- Exports and Imports --- Foreign Exchange --- Current Account Adjustment --- Short-term Capital Movements --- Open Economy Macroeconomics --- Empirical Studies of Trade --- Trade: General --- International economics --- Currency --- Current account surpluses --- Exports --- Current account --- Real effective exchange rates --- International trade --- Economic policy --- nternational cooperation --- China, People's Republic of

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Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs to external shocks and finds that in some circumstances managing such shocks with multiple instruments can both lessen the policy response required from any one policy tool to financial and external shocks and increase the effectiveness of policies in stabilizing macro-financial conditions. Effectiveness however does not always imply appropriateness, which rests on an evaluation of potential trade-offs and unintended consequences.

Banks and Banking --- Foreign Exchange --- Inflation --- Financial Markets and the Macroeconomy --- Monetary Policy --- Central Banks and Their Policies --- Current Account Adjustment --- Short-term Capital Movements --- Globalization: Macroeconomic Impacts --- Interest Rates: Determination, Term Structure, and Effects --- Price Level --- Deflation --- Currency --- Foreign exchange --- Banking --- Macroeconomics --- Central bank policy rate --- Exchange rates --- Exchange rate flexibility --- Exchange rate arrangements --- Financial services --- Prices --- Interest rates --- Russian Federation

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Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs to external shocks and finds that in some circumstances managing such shocks with multiple instruments can both lessen the policy response required from any one policy tool to financial and external shocks and increase the effectiveness of policies in stabilizing macro-financial conditions. Effectiveness however does not always imply appropriateness, which rests on an evaluation of potential trade-offs and unintended consequences.

Russian Federation