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The Monetary Policy of China- An Econometric Model

Author

Listed:
  • ªarlea Mihaela

    () („Babeº-Bolyai” University Cluj-Napoca Faculty of Economics and Business Administration)

  • Manþa ªtefan George

    () („Babeº-Bolyai” University Cluj-Napoca Faculty of Economics and Business Administration)

  • Vãidean Viorela Ligia

    () („Babeº-Bolyai” University Cluj-Napoca Faculty of Economics and Business Administration)

Abstract

An economy like that of China started out a lot of controversies and a lot of analysis. Recently, the monetary policy led by China gave birth to a series of disturbing questions, as follows: for how long can the fixed exchange rate be sustained? what will be the consequences of the continuous increase in foreign exchange reserves? is the expansionary monetary policy reliable? will the inflation bubble explode? In this article we apply an econometric model using the Eviews software in order to illustrate that the increase in money supply will eventually lead to inflation. This analysis is the basis to be followed up in the future if this co-dependence relationship between money supply and inflation continues. It would mean the end of the economic stability and growth of China. On the long run this model could prove that the Chinese economy is in fact a bubble ready to explode.

Suggested Citation

  • ªarlea Mihaela & Manþa ªtefan George & Vãidean Viorela Ligia, 2012. "The Monetary Policy of China- An Econometric Model," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 126-131, May.
  • Handle: RePEc:ovi:oviste:v:xii:y:2012:i:12:p:126-131
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    More about this item

    Keywords

    monetary policy; money supply; inflation; econometric model; expansionary monetary policy;

    JEL classification:

    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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