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A GDP dynamics model and monetary financial policy

Author

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  • LUO Tianyong

    (School of Finance, Guizhou College of Finance and Economics, Guiyang 550004, China)

Abstract

This article applies a dynamics approach in the research of monetary law of movement under the complex system of social economical operation, and characterizes the movement of money in a social institutional framework during GDP¡¯s formation. Assuming that humans¡¯ pursuit of the return of their money expenditure is a sensible course of nature, it defines the expression of money circulation velocity, and proceeds to deduce the basic differential equation of money circulation. By solving this equation, we can get the expression for a GDP dynamics model. After empirically testing the expression, this article draws a conclusion: GDP and the money in circulation (M0) share the positive correlation when the monetary financial institution remains unchanged.

Suggested Citation

  • LUO Tianyong, 2008. "A GDP dynamics model and monetary financial policy," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(2), pages 223-239, June.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:2:p:223-239
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0010-z
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    More about this item

    Keywords

    cash holding balances; exogenous money; monetary financial institution;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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