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The relationship among money supply, banking lending and aggregate demand in China: 1994-2006

Author

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  • LI Qiong

    (School of Economics, Peking University, Beijing 100871, China;)

  • WANG Zhiwei

    (School of Economics, Peking University, Beijing 100871, China;)

Abstract

Based on the framework of Bernanke & Blinader (1988) and Walsh (2003), this paper provides a concise analysis for relationship among money supply, banking lending and aggregate demand; and makes an empirical test on relationship among China¡¯s money supply, banking lending and aggregate demand from 1994 to 2006 by adopting the single-equation regressive model and vector autoregressive model in terms of Keynesian structural model and monetarism simplified model. The result shows that money supply and banking lending have both played a driving role on real economy. Because of non-market interest rates, Keynesian structural model cannot explain the transmission mechanism of China monetary policies better than monetarism simplified model.

Suggested Citation

  • LI Qiong & WANG Zhiwei, 2008. "The relationship among money supply, banking lending and aggregate demand in China: 1994-2006," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 3(4), pages 497-512, December.
    • Handle: RePEc:fec:journl:v:3:y:2008:i:4:p:497-512
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    File URL: http://journal.hep.com.cn/fec/EN/10.1007/s11459-008-0024-6
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    More about this item

    Keywords

    money supply; banking lending; aggregate demand;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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