The Competitive Game between Hot Money and Central Bank Monetary Policy

Ye Ji, Hua Fang, Xiao-bo Zhao


After the outbreak of U.S. Subprime Crisis in 2008, the outside hot money continued to pull into Chinese capital market. Combined with the appreciation of the RMB and the housing bubble in both stock and housing market, which made international short-term speculative capital went into Chinese market through a variety of informal tunnels, by the same time exacerbating the inflation, overflowing the liquidity and enhancing the high-level of CPI. While in the other side, Chinese Central Bank took actively monetary policy to respond to the hot money, through raising the deposit reserve ratio and interest rate to fight against with those unfriendly capitals. Therefore, how to find a point of balance between two game parts is the focus of this paper.


Hot money; Monetary Policy; Game

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