The Monetary Policy of China- An Econometric Model

ªarlea Mihaela (), Manþa ªtefan George () and Vãidean Viorela Ligia ()
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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

Ovidius University Annals, Economic Sciences Series, 2012, vol. XII, issue 1, 126-131

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.

Keywords: monetary policy; money supply; inflation; econometric model; expansionary monetary policy (search for similar items in EconPapers)
JEL-codes: E27 E47 E51 (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:ovi:oviste:v:xii:y:2012:i:12:p:126-131

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