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Comments on Ran Li, Peking University, "Monetary policy and China’s soaring leverage problem", 31 May 2017

While your work in that survey and in your pursuit is interesting and possibly important, one has take a broad and creative approach to what monetary tools can and can’t do. A useful lesson is what the FED did or has done in the aftermath of the Global Financial Crisis (particularly the financial crisis in the US following its subprime bursts.
You stated that: “Trying to maintain both inflation and financial stability would divert the limited power of monetary policy and complicate the evaluation of central bank performance.”
Please have a look at what the FED did, often dubbed as the so called an unconventional approach/method, and you may come to a very different conclusion.
One should not simply take the conventional view of monetary policies and be limited by that. One has to think creatively in dealing with the often complex reality.
I think China has done quite a bit of creative approaches in terms of monetary policies in dealing with banking reserve ratios and non-first home housing lending/loans.
You also argued that “To address the surging leverage issue, the root cause of rising leverage should be addressed through reform. China should adopt and strictly implement macro- and micro-prudential measures to prevent systemic risks. Instead of directly targeting leverage, the PBC should take the spillover effects to financial markets into consideration of all their decisions and closely cooperate with financial regulators. Further financial liberalisation and the removal of special protection for SOEs are also essential.”
Unless your reforms include creative approaches such as what the FED and the Chinese authorities have done, your advocate may be really too conventional and lack of some common sense. One should not be simply following a ‘textbook’ approach because that may be dogmatic.

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