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Money Supply, Inflation and Economic Growth in China: An ARDL Bounds Testing Approach

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  • Cheng-Wen Lee
  • Hao-Yuan Yu

Abstract

The empirical analysis applies the autoregressive distributed lag bounds testing approach to investigate the relationship between money supply, inflation and economic growth in China with the time series data from 1980 to 2018, estimate the cointegration of monetary and economic growth in long-run relationship and uses vector error correction model to determine the short-run adjustment between the variables. The research showed that the increase in national income met people's demand for goods and eased inflationary pressures. The results support the view of monetarism and help the government formulate economic policies in a prudent manner to control inflation in China. Â JEL classification numbers: A10, E52, P44

Suggested Citation

  • Cheng-Wen Lee & Hao-Yuan Yu, 2021. "Money Supply, Inflation and Economic Growth in China: An ARDL Bounds Testing Approach," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 11(1), pages 1-5.
    • Handle: RePEc:spt:apfiba:v:11:y:2021:i:1:f:11_1_5
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    References listed on IDEAS

    as
    1. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    2. Enock Nyorekwa Twinoburyo & Nicholas M. Odhiambo, 2018. "Monetary Policy and Economic Growth: A Review of International Literature," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 7(2), pages 123-137.
    3. Chi-Wei Su & Jiao-Jiao Fan & Hsu-Ling Chang & Xiao-Lin Li, 2016. "Is there Causal Relationship between Money Supply Growth and Inflation in China? Evidence from Quantity Theory of Money," Review of Development Economics, Wiley Blackwell, vol. 20(3), pages 702-719, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    ARDL bounds test; Long-Run; Monetary Neutrality.;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • P44 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - National Income, Product, and Expenditure; Money; Inflation

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