June 2020 issue contents
From Window Guidance to Interbank Rates: Tracing the Transition of Monetary Policy in Japan and China

Stefan Angricka,b and Naoyuki Yoshinoa,c


Japanese monetary policy up to 1991 was based on a mix of price-based and quantity-based instruments and targets. Echoes of this system are today found in Chinese monetary policy. We explore the transition of these two regimes using historical statistics, computational text analysis, and structural vector autoregressive (SVAR) models. Specifically, we examine the role of the interbank rate and "window guidance," a policy by which authorities communicate target quotas for lending growth directly to commercial banks. We empirically demonstrate the declining effectiveness of quantity measures and the increasing importance of price measures and provide recommendations for managing this transition.

JEL Code: E5, E52, E58.

Full article (PDF, 38 pages, 1,604 kb)
Online appendix

a Asian Development Bank Institute
b National Graduate Institute for Policy Studies
c Keio University