A study of the time-varying impact of capital account liberalization on monetary policy rules in the open economy: Evidence from China

This paper analyses the impact of capital account liberalization on monetary policy rules in an open economy, using a TVP-SV-VAR model. The results of the equal-interval impulse response reveal that the medium and long-term impacts of capital account liberalization shocks on monetary policy rules are more potent than those in the short term. The results of the time-point impulse responses indicate that the impact of capital account liberalization shocks on monetary policy rules in November 2013 shows a significantly stronger effect compared to March 2016. Both the results of the equal-interval and time-point impulse responses consistently indicate that capital account liberalization is more effective in stabilizing quantitative monetary policy rules compared to stabilizing price-based monetary policy rules.