SOCIAL STATUS AND THE GROWTH EFFECT OF MONEY*

It has been shown that in a standard one‐sector AK model of endogenous growth with wealth induced preferences for social status, the economy's growth rates of real output and nominal money supply are positively related when the cash in advance constraint is applied solely to the household's consumption purchases. However, a positive output growth effect of money/inflation is not consistent with the existing empirical evidence. We show that when gross investment must be financed by real money balances as well, this result is overturned, i.e. higher inflation is detrimental to economic growth, because of a dominating portfolio substitution effect.     

我国通货膨胀与货币供给和经济增长的关系研究

基于协整检验和VAR模型选取1984～2010年的年度数据研究了通货膨胀与货币供给和经济增长之间的关系,研究表明:货币供给和经济增长都会导致通货膨胀,但通货膨胀不会引发货币超发,且一定的通货膨胀对经济增长具有正向刺激作用;货币供应量扩张对通货膨胀有促进作用,但影响程度逐步减弱,经济增长也会促使物价水平的上涨,但影响程度明显小于货币供给水平的影响;经济增长对物价水平的影响小于货币供应量对物价水平的影响,即货币供应量诱发通货膨胀,抑制通货膨胀的最好途径是解决货币供给问题;经济系统中存在"通货膨胀螺旋"效应。     

Jacques Le Bourva's theory of endogenous credit-money ∗

About 30 years ago, Jacques Le Bourva published two little-known articles that clearly set out the present post-Keynesian theory of endogenous money developed by Kaldor and Moore. The main features of these two articles are presented, in particular Le Bourva's belief that reverse causation, rather than the instability of the velocity function, is the key objection to the quantity theory of money and the mainstream theory of inflation. Other features include a graphical and an algebraic pedagogical representation of the theory of endogenous money, the use of the Banking school's efflux/reflux mechanism, the dismissal of the money multiplier, and the impossibility of an excess supply of money. Le Bourva's theory of inflation also resembles that adopted by many post-Keynesians, in which price increases due to excessive wage demands and attempts by firms to raise their profit margins to finance investment.     

Domestic and International Sources of Inflation in Developing Countries: Some Evidence from the Monetary Approach

Using the monetary approach, this paper examines empirically the causes of inflation in twenty-five developing countries. In addition to money supply, the underlying money demand function and foreign exchange rates are taken into account in the inflationary process. The lag structures are determined by Akaike's FPE criterion and the exogeneity assumptions are assessed by Granger-type causality tests. The results suggest that the monetary approach provides adequate explanation of inflation across all countries examined. Besides changes in expected inflation and foreign exchange rates, movements in base money in these countries have significantly contributed to their inflationary pressures. [134, 431]     

货币政策、外部冲击与通货膨胀

利用2001年1月—2013年6月的月度数据,构建DCC-MVGARCH模型分析用货币供应量表征的我国内部因素和用汇率和国际原油价格表征的外部因素对我国通货膨胀率的动态影响。研究结果表明:我国通货膨胀既源于内部调整,也受到外部冲击的影响;内部因素中的货币供应量增长率是影响我国通货膨胀水平的主要决定因素;相对而言,外部因素对通货膨胀水平的影响不大。     

Granger causality of the inflation–growth mirror in accession countries*

The paper presents a model in which the exogenous money supply causes changes in the inflation rate and the output growth rate. While inflation and growth rate changes occur simultaneously, the inflation acts as a tax on the return to human capital and in this sense induces the growth rate decrease. Shifts in the model's credit sector productivity cause shifts in the income velocity of money that can break the otherwise stable relationship between money, inflation, and output growth. Applied to two accession countries, Hungary and Poland, a VAR system is estimated for each that incorporates endogenously determined multiple structural breaks. Results indicate Granger causality positively from money to inflation and negatively from inflation to growth for both Hungary and Poland, as suggested by the model, although there is some feedback to money for Poland. Three structural breaks are found for each country that are linked to changes in velocity trends, and to the breaks found in the other country.     

An Investigation into the Major Causes 01 Australia's Recent Inflation and Some Policy Implications*

This paper investigates the major causes of Australia's recent inflation with special emphasis on the 1970s and early 1980s A general model of inflation is formulated based upon a vector auto-regression The main empirical finding is that increases in wages and import prices and more recently in money have been significant causal factors of Australia's inflationary experience. Government current expenditure is found to contribute passively to cost-push inflation     

US monetary policy shocks and the Chinese economy: a GVAR approach

Using a global vector auto regressive (GVAR) methodology, this article examines the impact of US monetary policy shocks on China’s major macroeconomic indicators. Our analysis reveals that a positive shock to the US money supply growth rate initially increases China’s inflation rate but after some time this effect completely disappears. This shock also raises China’s short-term interest rate and the Chinese currency appreciates against the US dollar. A positive shock to the US short-term interest rate increases China’s short-term interest rate but the real output growth and inflation rates decline and the Chinese currency appreciates.     

Interest rate determination in a high inflation economy

This study examines the importance of the liquidity effect, inflation uncertainty, and supply shocks in determining interest rates in a high inflation economy (Israel). The results show that a significant liquidity effect exists when it is measured by a broad definition of money. The vanishing liquidity effect, found in studies of the U.S., may be the result of the use of M, to measure it. There is some support for the hypothesis that the strength of the liquidity effect is negatively related to the level of inflation. Interest rates are negatively (and significantly) affected by inflation uncertainty, and positively affected by supply shocks.     

中国货币供给与通货膨胀的关联性研究

关于货币供给与通货膨胀的关联性,学者们还没有形成一致的看法.理论上,货币供给与通货膨胀具有一定的关联性.通货膨胀有需求拉动型和成本推动型,在通货膨胀的原因中有“货币因素”,也有“非货币因素”.实证检验表明:中国货币供应量与物价指数不存在长期的稳定均衡关系,但货币供应量是物价指数的格兰杰原因,反之则不然.事实上,中国通货膨胀或通货膨胀压力一方面是与货币供给有关,另一方面还与结构性因素有关.因此,要实现中国经济的低通胀运行:一是实行总量均衡和结构合理的货币供给模式;二是采取更有效的货币政策;三是推进经济结构调整,实现国际收支平衡;四是深化金融体系改革,增强中央银行货币控制能力;五是进行汇率机制改革;六是通过财政政策调整供需结构.     

外汇占款与通货膨胀率关系研究

基于货币数量理论研究外汇占款对通货膨胀的影响有重大意义。首先采用VAR模型和Granger因果关系模型研究外汇占款、货币供应量和通货膨胀率之间的相互影响状况,同时运用脉冲响应模型和方差分解技术研究变量受系统内变量冲击的反应和波动情况。其次进行货币冲销有效性检验,结果显示:央行的货币冲销政策完全有效,货币冲销力度大约为-0.6,货币冲销弹性大于1,从整体来看,货币冲销有效性呈现弱递减趋势。     

A macroeconometric framework for monetary policy evaluation: A case study of Pakistan

This paper attempts to establish the quantitative importance of the various channels of monetary transmission by constructing, estimating and simulating a small macroeconometric model of Pakistan's monetary sector, while using data from the monetary statistics and the monetary survey of the State Bank of Pakistan over 1976–2007. The paper elucidates that the key feature of the study of monetary policy in Pakistan has been preoccupied with neglect either of the demand or the supply function of money and shows how this may lead to imprecise policy actions and mistaken conclusions. Accordingly, we delineate the transmission mechanism of monetary policy by taking into consideration all structural money demand and money supply linkages along with the historically implied identifying assumption in the framework of a marginalized macroeconometric model. The within-sample and out-of-sample evaluations of the model are found satisfactory. The paper presents results of three policy simulations from the estimated model that highlight the impact of alternative monetary policy instruments on the monetary variables under a rule-based and a discretionary policy environment. We find that (i) the SBP subscribes to an unannounced monetary policy rule, (ii) the determination of the policy rate under the announced rule environment stabilizes the monetary sector in that convergence to full equilibrium is smooth and rapid, (iii) a 100 bps reduction in the discount rate, ceteris paribus, decreases money supply by 4.97%, and (iv) the long term implication of reducing (increasing) the reserve requirement ratio on time (demand) deposits, ceteris paribus, is only higher inflation. Finally, we establish that a 100 bps increase in interest rate increases money supply by 3.14% in full equilibrium.     

Is there Causal Relationship between Money Supply Growth and Inflation in China? Evidence from Quantity Theory of Money

This study examines the causal relationship between Chinese money supply growth and inflation, using the bootstrap Granger full‐sample causality test and sub‐sample rolling‐window estimation test to determine whether such a relationship in China supports the quantity theory of money. The result indicates that there is a unidirectional relationship from inflation to money supply growth. However, considering structural changes in two series, we find that short‐run relationships using full‐sample data are unstable, which suggests that full‐sample causality tests cannot be relied upon. Then, we use a time‐varying rolling‐window approach to revisit the dynamic causal relationship, and the results show that money supply growth has both positive and negative impacts on inflation in several sub‐periods, and in turn, inflation has the same effects on money supply growth for China. These findings are basically consistent with the modern quantity theory of money from the perspective of money supply and price level. When money supply growth does not outweigh output growth, inflation should not be curbed only by decreasing money supply. It notes that a stable money supply growth is critical to price level stability and economic development in China.     

The inflationary experiences of six developing countries in Asia: an investigation of underlying determinants

This paper investigates major deteminats of the inflation rate in six Asian developing countries. The sample includes low and moderate-high inflation cases. For the investigation a monetarist model of the inflation rate adjusted to account for important external factors is used. The results show that the growth of the money stock was not a primary source of inflation in all countries. However, various factors that influence the public's willingness to hold money are behind inflationary pressures across countries. Among these, some are external factors stemming from changes in foreign interst rates and import prices. Overall, the evidence suggests that the success of domestic policy in fighting inflation is highly dependent on the unique inflationary experience of each country.     

Monetary policy and asset prices

The purpose of this paper is study the effect of monetary policy on asset prices. We study the properties of a monetary model in which a real asset is valued for its rate of return and for its liquidity. We show that money is essential if and only if real assets are scarce, in the precise sense that their supply is not sufficient to satisfy the demand for liquidity. Our model generates a clear connection between asset prices and monetary policy. When money grows at a higher rate, inflation is higher and the return on money decreases. In equilibrium, no arbitrage amounts to equating the real return of both objects. Therefore, the price of the asset increases in order to lower its real return. This negative relationship between inflation and asset returns is in the spirit of research in finance initiated in the early 1980s.     

Private information, money, and growth: Indeterminacy, fluctuations, and the Mundell-Tobin effect

We introduce an informational asymmetry into an otherwise standard monetary growth model and examine its implications for the determinacy of equilibrium, for endogenous economic volatility, and for the relationship between steady-state output and the rate of money growth. Some empirical evidence suggests that, for economies with low initial inflation rates, permanent increases in the money growth rate raise long-run output levels. This relationship is reversed for economies with high initial inflation rates. Our model predicts this pattern. Moreover, in economies with high enough rates of inflation, credit rationing emerges, monetary equilibria become indeterminate, and endogenous economic volatility arises.     

An empirical evaluation of China’s monetary policies

This paper investigates the responsiveness of the Chinese government’s monetary policies in terms of the money supply and interest rates to economic conditions and the effectiveness of these policies in achieving the goals of stimulating economic growth and controlling inflation. We analyze the responsiveness and effectiveness by estimating the Taylor rule, the McCallum rule, and a vector autoregressive model using quarterly data in the period of 1992-2009. The results show that, overall, the monetary policy variables respond to economic growth and the inflation rate, but the magnitudes of the responses are much weaker than those observed in market economies. Money supply responded actively to both the inflation rate and the real output and had certain effects on the future inflation rates and real output. The official interest rates, on the other hand, responded passively to the inflation rate and did not respond to the real output. They do not have any effect on future inflation rates and real output either.     

The Sovereign Yield Curve and the Macroeconomy in China

A dynamic Nelson–Siegel model is adopted to estimate three time‐varying factors of yield curves, the level, the slope and the curvature, and a vector autoregressive model is built to study interactions between macro variables and the yield curve. Results show that, first, money supply growth is a more effective instrument to curb inflation than the monetary policy interest rate; however, the central bank also adjusts the interest rate to stabilize money supply. Second, investment is an important measure to stimulate the Chinese economy, but it also pushes up money supply growth, which results in higher inflation. Third, the yield curve reacts significantly to innovations to investment growth and money supply growth. The segmentation of China's bond market hinders the efficient implementation of monetary policy, and the monetary policy transmission mechanism is still weak in China. Finally, interactions between the yield curve and the macroeconomy in China are nearly unidirectional. Macroeconomic variables reshape the yield curve, but direct adjustments of the yield curve do not significantly change macroeconomic variables. Due to the incomplete liberalization of financial markets, there exists a wide disjunction between the real economy and financial markets in China.     

Budget Deficits Expected Inflation and Short-Term Real Interest Rates: Evidence for the U.S.

This paper examines a number of issues concerning the determination of short-term real interest rates. We include actual inflation and several measures of expected inflation in order to determine whether empirical results are sensitive to the choice of the inflation variable. The results strongly suggest that the estimated coefficients are unaffected by the choice of the interest rate variable and, implicitly, the inflation variable. Deficits are not found to have a positive effect on all measures of the dependent variable, while increases in the real money supply and the inflation variables depress real interest rates. [311]     

货币供应量能预测中国通货膨胀吗?

研究表明,M0,M1,M2均对我国通货膨胀没有影响,且不能预测通货膨胀。因此,在短期内不能单纯采用控制货币供应量的货币政策来治理通货膨胀。但是,即便货币供应量对通货膨胀没有影响,仍不能否认货币供应量作为中介目标的意义,也不意味着可以任意地发行货币。