A Prospective Study of the Macroeconomic Effects of Chinas Unconventional Monetary Policy

In this paper, it constructs a DSGE model with the segmentation of the bond market and examine the responses of the economic system after the implementation of the unconventional monetary policy without a zero bound constraint. The results show that, the long-term interest rates decrease by quantitative easing or operation twist, accompanied with rise in output and inflation. The results also reveal the response of output to unconventional monetary policy has obvious persistence feature. Finally, this paper comes to the conclusion that China's economy is more suitable for operation twist at present stage.