XU Xiaojun, SU Zhifang：Asymmetric Effect of Monetary Policy and Policy Choices in China——Empirical Studies Based on the Perspective of Downward Rigidity of Wages and Prices

Abstract：In order to investigate asymmetric effects of monetary policy and the causes, in a framework of the new Keynesian analysis, the wage downward rigidity and the price downward rigidity are built in a structural model. The paper then uses perturbation method to get the second order approximation to the nonlinear model, and with the Chinese macroeconomic quarterly data, uses simulated method of moments to estimate the model structure parameters. Finally, stochastic dynamic simulation analysis is conducted based on the estimated parameters. Model parameter estimation results indicate that the wage and price changes have significant downward rigidity characteristics. Dynamic simulation analysis of the model on the estimated parameters shows that monetary policy produces two different types of asymmetric effects: monetary policy with the same size but different directions has a different impact effect, and the monetary policy with the same direction but different sizes exerts a non-linear proportion effect. This paper has reference significance for China's central bank about how to choose an appropriate monetary policy tool according to economic situations, and how to determine enforcement degree of policy tools.

Key words： Wage Downward Rigidity    Price Downward Rigidity    Asymmetry of Monetary Policy    Nonlinear DSGE   SMM Estimation

source:Finance & Trade Economics ,No.7,2015