Uncertainty, macroeconomic fluctuation and the selection of monetary policy rules in China: a quantitative analysis based on Bayesian DSGE Model


ZHUANG Ziguan;CUI Xiaoyong;ZHAO Xiaojun


School of Finance, Zhongnan University of Economics and Law;School of Economics, Peking University;School of Economics, Peking University


This paper estimates a monetary DSGE model with Bayesian method based on models from Christiano et al. (2005) and Smets & Wouters (2003) to analyze the selection issues of China’s monetary policy rules by using China’s macro quarterly data, such as GDP, consumption, investment, interest rate, monetary supply, price index and employment. With respect to Chinese macroeconomy and the complexity of monetary policy operations, this paper assumes three operational rules which are Taylor rule 1, Taylor rule 2 and MacCullum rule and the model faces uncertainties from model parameters and multiple macroeconomic shocks. Bayesian estimation results show that model parameter uncertainties only influence the magnitude of monetary policy shocks effects, rather than change the direction of it. Results also show that the selection of monetary policy rules is mainly affected by macroeconomic shocks, and the impulse response analysis indicates that the central bank should adopt Taylor rule 2.


macroeconomic fluctuation;DSGE Model;monetary policy rules;Bayesian estimation


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Total: 36 articles

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