12  Market-based allocations of capital do not take into account environmental and other external effects, unless additional mechanisms such as tradable pollution permits are employed. 13  Goodfriend and Prasad (2006) provides a good description of the banking and financial systems of China and of issues regarding the implementation of monetary policy.
BIS Review 124/2006  3  The People's Bank of China (PBOC), the nation's central bank, is capable and well-respected around the world. However, monetary policy can work well only to the extent that financial markets are sufficiently developed to allow the monetary authorities' interest-rate decisions to affect economic activity in a reasonably predictable way.