IDEAS home Printed from https://ideas.repec.org/a/eee/reveco/v42y2016icp327-338.html
   My bibliography  Save this article

Land supply and money growth in China

Author

Listed:
  • Liu, Taoxiong
  • Huang, Mengdan

Abstract

China has experienced several episodes of inflation in recent years. Popular arguments attribute these episodes to relatively high growth rates of money, which were then primarily explained by China's accumulation of foreign exchange reserves and the undervaluation of RMB. We attempt to explain China's high monetary growth rates through the supply of land. Under China's land system, the supply of land is controlled by the government and can be viewed as exogenous to the monetary system. An increase in the money supply stimulates bank loans and thereby monetary growth. Both an error correction model and a simultaneous equations model are developed to explore the effect of the land supply on monetary growth. The empirical results show that the effect of the land supply on the money supply is significantly positive and even exceeds that of foreign exchange reserves. The significance for monetary policy is that, under China's existing political economy, both the central bank and local governments should be responsible for monetary policy and price levels.

Suggested Citation

  • Liu, Taoxiong & Huang, Mengdan, 2016. "Land supply and money growth in China," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 327-338.
  • Handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:327-338
    DOI: 10.1016/j.iref.2015.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1059056015001562
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Du, Hongyan & Ma, Yongkai & An, Yunbi, 2011. "The impact of land policy on the relation between housing and land prices: Evidence from China," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(1), pages 19-27, February.
    2. Louis-Philippe Rochon, 2001. "Cambridge's Contribution to Endogenous Money: Robinson and Kahn on credit and money," Review of Political Economy, Taylor & Francis Journals, vol. 13(3), pages 287-307.
    3. World Bank, 2005. "China Land Policy Reform for Sustainable Economic and Social Development : An Integrated Framework for Action," World Bank Other Operational Studies 8254, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dong, Yilin, 2016. "A note on geographical constraints and housing markets in China," Journal of Housing Economics, Elsevier, vol. 33(C), pages 15-21.

    More about this item

    Keywords

    Land supply; Money supply; Foreign exchange reserves;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:42:y:2016:i:c:p:327-338. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/620165 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.