China has maintained a closed capital account to the private sector and channeled capital flows through the public sector by foreign exchange interventions. This paper presents an open economy model that incorporates this capital account policy configuration in order to study whether foreign...

Since the global financial crisis, non-reserve-issuing economies (NREs) have been highly sensitive to episodes of external pressures. With monetary policy independence constrained by this sensitivity, many NREs have utilized other policy instruments. This paper confirms the vulnerability of NREs...