Influence of the People’s Bank of China Monetary Policy on the Country’s Economic Development

The article is devoted to the analysis of the monetary policy of the Chinese central bank and influence of some monetary instruments on the economic growth, trade balance, and net foreign investments. It is marked that monetary policy of the People’s bank of China follows the aim of contributing to a high rate of economic growth from the period of its functioning as a real central bank. Nowadays the Chinese central bank implements an independent monetary policy and uses classical and modern instruments for the Chinese banking system. Its policy influences the Chinese economy in a good way. In order to make a model we use the modified equations of the Keynesian theory which reflect the dynamic of output, trade balance and net foreign investments. The dependences are assessed using original statistics from the national official sources. The period under investigation is from the second quarter 1992 to the fourth quarter 2017. The method of investigation is econometric analysis with the autoregressive distributed lag model and error correction process, and structural shifts taking into account. Based on the equation assessments we can conclude that there is an influence of real interest rates and real effective exchange rate on the indices under consideration. The periods of time for structural shifts were determined (the fourth quarter 2007 and the first quarter 2008); the influence became stronger after them