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Output and Price Fluctuations in China's Reform Years: What Role did Money Play?

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  • Yin Zhang
  • Guanghua Wan

Abstract

The Chinese economy underwent cyclical fluctuations in growth and inflation in the reform period. Contrasting views exist on the role of money in such fluctuations. This paper assesses these views employing structural VEC models based on the exchange equation. It is found that in the long run money accommodates, rather than causes, changes in output and prices. In the short run, price fluctuations are mostly attributable to shocks that have permanent effects on prices and money but not on real output.

Suggested Citation

  • Yin Zhang & Guanghua Wan, 2004. "Output and Price Fluctuations in China's Reform Years: What Role did Money Play?," WIDER Working Paper Series RP2004-56, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:rp2004-56
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    File URL: https://www.wider.unu.edu/sites/default/files/rp2004-056.pdf
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    References listed on IDEAS

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    1. Burdekin, Richard C.K. & Siklos, Pierre L., 2008. "What has driven Chinese monetary policy since 1990? Investigating the People's bank's policy rule," Journal of International Money and Finance, Elsevier, vol. 27(5), pages 847-859, September.

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