Current Research
Published Papers
Can You Hear Me Now? Identifying the Effect of Chinese Monetary Policy Announcements
Published in Journal of International Money and Finance, 2024
Abstract: Do Chinese monetary policy announcements matter? This study evaluates how relevant Chinese monetary policy announcements are to Chinese financial markets and the real side of the economy. Chinese monetary policy is identified by estimating a “target” factor measuring policy surprises and a “path” factor measuring future expectations of policy using price changes to Chinese financial derivatives on policy announcement dates. Local projection results show that 1) Chinese Treasury yields and interbank rates respond persistently, suggesting that policy transmission through an interest-rate channel exists; 2) Equities and exchange rates do not respond to policy announcements instantaneously, but with a lag; 3) Future expectations of Chinese monetary policy play a larger role than surprises, 4) Real variables show evidence of policy transmission, and 5) policy transmission may be sticky due to information frictions.
Recommended Citation: Shieh, Harrison. (2024). “Can You Hear Me Now? Identifying the Effect of Chinese Monetary Policy Announcements.” Journal of International Money and Finance. Vol. 144.
Notes:
- Factors updated to June 2025. Additional announcements were added to the original 2006–2019 sample upon review of PBOC announcements.
- Original factors are inaccurate; please use the updated set. Since the factors are PCA-estimated over the full sample length, contact me if you require a truncated-sample version.
Working Papers
Journey to the (North, South, East, and) West: Global Spillovers of Chinese Monetary Policy
Joint w/ Anirban Sanyal. UC Santa Cruz CAFIN Working Paper No. 2512 (Revisions Requested at the European Economic Review), 2026.
Abstract: We evaluate the role production linkages play in the global transmission of Chinese monetary policy shocks through global stock returns. Using a heterogeneous spatial autoregression (SAR) with identified Chinese monetary policy shocks, we explore how shocks propagate upstream and downstream through a supply-chain channel of monetary policy. We highlight that the type of monetary policy shock matters: Target shocks transmit almost entirely through supply-chains and Path shocks operate through an additional non-network financial spillover component. On average, firms connected to the Chinese production network show negative country-industry level annualized equity returns in response to contractionary monetary policy. Notably, 86-99% of the observed responses to Target shocks and 47-57% of Path shocks can be attributed to the network effect of firms being connected across global supply-chains, with the downstream component showing a larger effect, indicating that a supply-chain channel is a dominant policy transmission channel for China. We also find that compared with US monetary policy shocks, Chinese shocks do not move global risk measures, with Path responses consistent with expectations or information effects. Our results underscore the role global supply-chains play in China’s increasing influence on global markets.
Recommended Citation: Sanyal, Anirban and Harrison Shieh. (2024). “Journey to the (North, South, East, and) West: Global Spillovers of Chinese Monetary Policy.” Working Paper.
This Time Is (Mostly) Different: U.S. Tightening Cycles and Global Resilience in the 1980s vs 2020s
Joint w/ Drishan Banerjee and Galina Hale. NBER Working Paper No. 35673; CEPR Discussion Paper No. DP21874, 2026.
Abstract: Post-pandemic inflation raised fears that U.S. monetary tightening would trigger a repeat of the 1982 sudden stop in capital flows to emerging economies. Yet as of 2026 no global recession has followed. We establish three stylized facts distinguishing the 1980s from the 2020s, beyond the shift to flexible exchange rates: monetary policy effectiveness, fiscal space, and external vulnerabilities. We rationalize them in a Mundell-Fleming framework with a fiscal space constraint, which predicts a central role for fiscal space in transmitting foreign currency risk-free rate increases. Cross-country evidence confirms that fiscal space shapes economic performance post-tightening.
Recommended Citation: Banerjee, Drishan, Galina Hale, and Harrison Shieh. (2026). “This Time Is (Mostly) Different: U.S. Tightening Cycles and Global Resilience in the 1980s vs 2020s.” NBER Working Paper No. 35673.
What They Do in the Shadows: Chinese Shadow Credit Growth and Monetary Policy
UC Santa Cruz CAFIN Working Paper No. 2216, 2021.
Abstract: This study seeks to evaluate the effect of Chinese monetary policy shocks on credit creation through the shadow banking sector in Mainland China. Identification is achieved by constructing a measure of monetary policy surprises based on changes to the 1-Year Interest Rate Swaps on the 7-Day Repo Rate on monetary policy announcement dates. A two-stage local projection was then estimated, using the surprise measure as an instrument. The results give two key findings: 1) shadow credit expands in response to contractionary monetary policy, and 2) there is additional evidence of the transmission of monetary policy through the interest rate channel
Recommended Citation: Shieh, Harrison. (2021). “What They Do in the Shadows: Chinese Shadow Credit Growth and Monetary Policy.” UC Santa Cruz CAFIN Working Paper No. 2216.