Since the early 2000s, China's central bank has been intervening actively in the foreign exchange markets to prevent sharp appreciation of the Chinese currency. At the same time, it issues central bank bills, a type of short-term central bank debt, to absorb the increase of bank reserves caused...

In the context of the trilemma hypothesis, this paper documents heterogeneous responses to international monetary shocks, emphasizing an important role of inflation. Periphery countries’ monetary policy autonomy is subject to their inflation. When the center country increases the interest...