Macroprudential policy, central banks and financial stability: Evidence from China

Jan Klingelhöfer, Rongrong Sun (Lead / Corresponding author)

Research output: Contribution to journalArticlepeer-review

33 Citations (Scopus)


We study the Chinese experience and provide evidence that central banks can play an active role in safeguarding financial stability. The narrative approach is used to disentangle macropudential policy actions from monetary actions. We show that reserve requirements, window guidance, supervisory pressure and housing-market policies can be used for macroprudential purposes. Our VAR estimates suggest that well-targeted macroprudential policy has immediate and persistent impact on credit, but no statistically significant impact on output. Macroprudential policy can be used to retain financial stability without triggering an economic slowdown, or as a complement to monetary policy to offset the buildup of financial vulnerabilities arising from monetary easing. A well-designed mix of these two policies helps to achieve both macroeconomic and financial stability objectives, which, however, requires central banks to maintain a multi-instrument framework.
Original languageEnglish
Pages (from-to)19-41
Number of pages23
JournalJournal of International Money and Finance
Early online date31 Dec 2018
Publication statusPublished - May 2019


  • macroprudential policy
  • monetary policy
  • credit
  • financial stability
  • China


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