Chinese Monetary Expansion and the US Economy

Joaquin Vespignani and Ronald Ratti

No 16874, Working Papers from University of Tasmania, Tasmanian School of Business and Economics

Abstract: This paper examines the influence of monetary shocks in China on the U.S. economy over 1996-2012. The influence on the U.S. is through the sheer scale of China’s growth through effects in demand for imports, particularly that of commodities. China’s growth influences world commodity/oil prices and this is reflected in significantly higher inflation in the U.S. China’s monetary expansion is also associated with significant decreases in the trade weighted value of the U.S. dollar that is due to the operation of a pegged currency. China manages the exchange rate and has extensive capital controls in place. In terms of the Mundell–Fleming model, with imperfect capital mobility, sterilization actions under a managed exchange rate permit China to pursue an independent monetary policy with consequences for the U.S.

Keywords: Keywords: International monetary transmission; China’s monetary aggregates (search for similar items in EconPapers)
JEL-codes: E52 F41 F42 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2013-08-05, Revised 2013-08-05
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
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Published by the University of Tasmania. Discussion paper 2013-04

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Related works:
Working Paper: Chinese monetary expansion and the U.S. economy: A note‎ (2013)
Working Paper: Chinese monetary expansion and the U.S. economy (2013)
Working Paper: Chinese monetary expansion and the U.S. economy (2013)
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