U.S. Money Supply and China’s Business Cycles

Yanbin Chen, Kai Liu and Zhexi Liu

Emerging Markets Finance and Trade, 2018, vol. 54, issue 5, 957-980

Abstract: This article models the U.S. dollar as a world currency in a global DSGE framework, and investigates the spillover effects of the U.S. money supply shock on China’s economy. Exchange rate targeting and capital controls in the context of dollar hegemony are investigated. Given a positive U.S. money supply shock, both the inflation and real GDP of China will be below their steady-state levels in the medium term; while for the U.S. there is no inflation pressure. The spillover of liquidity effect exists. Cost-push effects and relative price effects are employed to discuss the transmission mechanism. Under the U.S. money supply shock, a fully liberalizing reform with no capital controls and a floating exchange rate of Renminbi is not the best reform for China.

Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2017.1417833 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:54:y:2018:i:5:p:957-980

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2017.1417833

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().