The relationship among money supply, banking lending and aggregate demand in China: 1994-2006

Qiong Li and Zhiwei Wang ()
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Qiong Li: School of Economics, Peking University, Beijing 100871, China;
Zhiwei Wang: School of Economics, Peking University, Beijing 100871, China;

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2008, vol. 3, issue 4, 497-512

Abstract: Based on the framework of Bernanke & Blinader (1988) and Walsh (2003), this paper provides a concise analysis for relationship among money supply, banking lending and aggregate demand; and makes an empirical test on relationship among China¡¯s money supply, banking lending and aggregate demand from 1994 to 2006 by adopting the single-equation regressive model and vector autoregressive model in terms of Keynesian structural model and monetarism simplified model. The result shows that money supply and banking lending have both played a driving role on real economy. Because of non-market interest rates, Keynesian structural model cannot explain the transmission mechanism of China monetary policies better than monetarism simplified model.

Keywords: money supply; banking lending; aggregate demand (search for similar items in EconPapers)
JEL-codes: E51 E58 (search for similar items in EconPapers)
Date: 2008
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