China's unconventional monetary policy in response to Covid-19

Jin, Chang (2025). China's unconventional monetary policy in response to Covid-19. University of Birmingham. Ph.D.

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Abstract

This thesis examines the efficacy of China’s unconventional monetary policy (UMP) in alleviating the economic disruption resulting from the Covid-19 pandemic. The study first utilizes a computable general equilibrium (CGE) framework to analyze the pandemic shock, breaking it down into direct, indirect, and interaction effects across various sectors. It identifies small and medium-sized enterprises and service industries as the most susceptible to these impacts.

This study assesses China-specific unconventional monetary policy instruments—targeted liquidity facilities, credit-support measures, and foreign exchange management—through a standard econometric framework. A TVP-SV-VAR model evaluates the transmission effects of specific tools, whereas a DSGE model incorporating policy expectations analyzes the systemic effects of policy combinations.

Results indicate that UMP measures contributed moderately yet significantly to economic recovery, with quantity-based interventions producing quicker short-term benefits but exhibiting diminished long-term effectiveness in the absence of complementary fiscal coordination. The effectiveness of policy relied on achieving a balance between flexibility and predictability while addressing structural frictions in transmission. Data from a high-frequency inflation expectations index, derived from social media, indicates that public sentiment responds more swiftly to real-time information compared to official announcements, highlighting the importance of digital monitoring in monetary policy.

The findings indicate that improving market-oriented reforms, broadening China-specific UMP instruments, and institutionalizing real-time expectation measures may enhance the adaptability and accuracy of monetary policy in addressing future shocks.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):