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Is U.S. Money Causing China'S Output?

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Author Info

  • Johansson, Anders C.

    ()
    (China Economic Research Center)

Abstract

This paper tries to answer the long-standing question of whether money causes output. Instead of focusing on domestic monetary policy and output, we analyze U.S. monetary policy and its possible effects on real output in China. Our results indicate that the main monetary instrument in the U.S., the Federal Fund Rate, Granger causes China’s output. A second monetary variable, U.S. money supply, does not seem to have a significant effect on China’s output. The results are supported by variance decompositions, which indicate that Federal Fund Rate shocks have an effect on China’s real output. The findings have important implications for policy makers in China that focus on maintaining a high and stable economic growth.

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Bibliographic Info

Paper provided by China Economic Research Center, Stockholm School of Economics in its series Working Paper Series with number 2009-6.

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Length: 28 pages
Date of creation: 15 Mar 2009
Date of revision: 15 May 2009
Publication status: Forthcoming in China Economic Review.
Handle: RePEc:hhs:hacerc:2009-006

Contact details of provider:
Postal: China, Economic Research Center, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-8-736 90 00
Fax: +46-8-31 81 86
Web page: http://www.hhs.se/CERC/
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Related research

Keywords: China; United States; Monetary policy; Output; Causality; VECM;

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Cited by:
  1. Johansson, Anders C., 2009. "Asian Sovereign Debt and Country Risk," Working Paper Series 2009-11, China Economic Research Center, Stockholm School of Economics.
  2. Johansson, Anders C., 2010. "China’s Growing Influence in Southeast Asia - Monetary Policy and Equity Markets," Working Paper Series 2010-16, China Economic Research Center, Stockholm School of Economics.

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