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WHAT ARE SPILLOVER TRANSMISSION CHANNELS FROM CHINA’S MONETARY POLICY TO ASIA: BAYESIAN VECTOR AUTOREGRESSIVE APPROACH

International Economics Faculty, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

E-mail Address: trinhptt@buh.edu.vn

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P. A. LE NHAN

International Economics Faculty, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

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T. H. VU MINH

Department of Personnel Affairs, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

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L. L. VO DAN

International Economics Faculty, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

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T. T. BUI MY

Division of Economic Mathematics, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

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, and

T. H. NGUYEN VINH

International Economics Faculty, Banking University of Hochiminh City, 36 Ton That Dam Street, District 1, Nguyen Thai Binh Ward, Hochiminh City, Vietnam

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https://doi.org/10.1142/S0217590821410071Cited by:2 (Source: Crossref)

This article is part of the issue:

Special Issue on Monetary Policy Issues and Challenges in Emerging Market Economies
Guest Editor: Paresh Kumar Narayan (Monash University)

Abstract

This study employs Bayesian vector autoregressive method to investigate spillover effects from China’s monetary policy to Asian economies through the exchange rate, domestic demand, and financial channels. The domestic demand channel plays dominant role to the transmission of China’s monetary spillover. While the weak impact of the exchange rate channel could be explained by the positive correlated response of Asian currencies to renminbi shock, the limited influence of the financial channel is due to low financial development and high restrictions on capital flows of China. We suggest Asian authorities should reduce the export reliance on China and prepare macro-prudential instruments to minimize their economies’ vulnerability to foreign shocks.

Keywords:

JEL: C32, E52, F42

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