ESSAYS ON MONETARY POLICY, CHINA'S ECONOMY AND EXCHANGE RATE

This paper consists of three papers that allow me to study three different economic phenomena. The discussion focused on topics related to US bank deregulation, Chinese resource allocation mistake, currency arbitrage trading strategy. In particular, I am aiming to study the relationship between the deregulation of Bank of America in the mid 1980s and the great stability between the US and the beginning of the 2007 subprime mortgage crisis. Method

The first paper simulates the impact of deregulation of banks on output volatility and corporate dynamics. By introducing cost channels and banking transactions into the models of Bilbiee, Ghironi, and Melitz (2007), we tested the volatility change under various shocks before and after deregulation. According to the simulation, if bank spread is reduced by one third, the volatility of production and the number of producers will be greatly reduced. This can provide a possible explanation for mitigation from the mid-1980s to the mid-2000s.

The second paper has constructed a dynamic probabilistic general equilibrium model of China with heterogeneous sectors and resource inconsistencies. Recent literature suggests that there is a serious resource mismatch between Chinese state enterprises and private enterprises. We found that the existence of resource mismatch alters the conclusion of standard monetary policy in an important way. We revealed that monetary policy has a further substantial impact, ie a distribution effect. This is different from the standard New Keynesian framework. The actual effect of this framework is due to price rigidity. The shock of monetary policy has different influences on private enterprises and state enterprises. Given the common shocks, private enterprises have higher volatility in production than state-owned enterprises. The model can easily be extended to other developing countries with similar circumstances

The third article uses two methods to build an arbitrage trading strategy. The first is minimum variance, which is affected by specific revenue and weight constraints. The other is maximum R 2 squared. With MATLAB you can calculate the optimum weight, yield, and sharp ratio in both ways. By comparing sharp ratios at different time intervals we can see that the overall maximum R-square method is relatively more accurate than the minimum variance method. This provides another way to build an arbitrage trading portfolio.

In the last paper, the focus was on China's overall economic dynamics and the transfer of monetary policy. For this purpose, we developed a dynamic stochastic general equilibrium model tailored to the Chinese economy. In this article we will examine the impact of rebalancing on the economy, which is far from investment-driven growth that is widely recognized as important for China. The overall economic impact of necessary rebalancing has not been widely analyzed in previous literature. This paper examines how the economy responds to the influence of balanced monetary policy and technological innovation, compared to the current economic structure. The monetary policy of the model follows Taylor's rules. The result shows that rebalancing does not significantly affect the economic monetary policy shock transmission.

The purpose of this paper is to study Chinese monetary policy in a changing policy environment. In terms of policy environment and the use of policy measures, China is different from developed countries. Since the central bank of China is under the control of the government, it is also difficult to distinguish monetary policy goals from other policy goals. The paper in this paper is trying to clarify the uncertain policy-making practices of financial authorities and selected policy instruments. Another goal is to verify China's policy transmission through various tools.

This paper consists of four independent but relevant papers that provide an implementation of monetary policy in China and an empirical assessment of the policy environment. In the first article we will examine the relevance of a number-based McCallum style policy rule to achieve price stability. The results of the study showed that departure from the money supply regulation helped predict price development, therefore emphasizing the relationship between China's money supply and price. In the second article, we examined the possibility of selecting a broader policy rule, examined the implementation of monetary policy and the tools used by the central bank. Finding money supply and interest rate means will react differently to price and production development. Over time, interest rate products are becoming more and more important and emphasize the transition to more market-oriented policy development in China.