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Liquidity expansion in China and the U.S. economy

Listed author(s):
  • Kang, Wensheng
  • Ratti, Ronald A.
  • Vespignani, Joaquin L.

This paper investigates the influence of liquidity shocks in China on the U.S. economy over 1996-2012. The influence on the U.S. is through China’s influence on demand for imports, particularly that of commodities. In all models estimated a positive innovation in China’s liquidity is associated with: 1) a positive and statistically significant effect on oil and commodity prices that builds up rapidly over three months and then persists for twenty months; 2) a positive and statistically significant effect on U.S. CPI inflation that builds up over about six months or so and then persists; 3) a statistically significant depreciation of the real trade-weighted U.S. currency after about two or three months that achieves maximum absolute value after five to eight months and that then persists.

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File URL: https://mpra.ub.uni-muenchen.de/59338/1/MPRA_paper_59338.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 59338.

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Date of creation: 01 Aug 2014
Handle: RePEc:pra:mprapa:59338
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