Fed Monetary Policy Spillovers,Central Bank Expectation Management and Chinese Asset Prices
Against the backdrop of persistent global liquidity constraints and escalating geopolitical conflicts,the People's Bank of China's(PBC's)approach of prioritising domestic issues by"balancing internal and external factors"has become a pivotal consideration in its monetary policymaking.This paper presents a compendium of central bank communications on monetary policy reports.It employs textual analysis to extract sentiment indicators from US and Chinese monetary policy reports,examines the impact of the Federal Open Market Committee's(FOMC's)monetary policy on China's capital market and highlights the critical role that PBC plays in preventing external monetary policy shocks.Empirical results indicate that:(1)in addition to the traditional Federal Reserve(Fed)monetary policy shocks,FOMC sentiment communications also significantly affect China's A-share market and concentrate on the role of dovish sentiment;(2)the PBC can effectively alleviate the adverse impacts of the Fed's pessimism by releasing positive sentiment reports;and(3)the mechanism analysis suggests that PBC's positive communication sentiment can effectively mitigate investors'negative expectations and reduce investors'disagreement through signalling and synergistic channels,thereby promoting market stability.In conclusion,the paper's findings provide empirical support for preventing monetary policy spillovers from developed economies.
central bank communicationsChinese asset pricesUS monetary policy spilloverstextual analysis