Hot Money and Business Cycle Volatility： Evidence from China

This paper investigates the link between hot money and business cycle volatility in China from January 1997 to December 2009. Using the structural vector error correction model we find a considerable degree of long-run cointegration and bidirectional causality effects between hot money and business cycle volatility. The speculative shocks are found to temporarily promote China＇s economic growth, but also to exacerbate business cycle volatility. The liquidity shock stemming from hot money is shown to be the primary factor responsible for the significantly enhanced fluctuation in business cycles during the most recent global financial crisis period This could be detrimental to the smooth operation of financial markets. Therefore, informing future policies, it is critical for policy-makers to take precautions against the speculative factors.     

Modern Money Theory and Distributive Justice

Modern money theory is a conjecture concerning fiscal spending and the nature of money. I show that modern money theory provides two interesting insights into distributive justice that have not been addressed in the recent Anglo-American distributive justice literature: (i) that the nature of a sovereign fiat currency allows for some distributive conflicts to be avoided; and (ii) that recent Anglo-American distributive justice theories assume that the economy is at capacity. Based on this, I consider whether the policy results of modern money theory can help foster a sense of justice.     

Dynamic panel cointegration approaches to the estimation of money demand functions

This paper investigates properties of the money demand functions of Group of Six (G6) member countries (Canada, France, Italy, Japan, U.K., and U.S.) using the estimation and inference techniques of panel cointegration. Empirical analyses are conducted by estimating money demand equations of G6 countries individually and as a whole, allowing heterogeneity in individual specific fixed effects across countries through dynamic, nonstationary panel estimation techniques. By using recently developed panel cointegration techniques, the paper contributes to the literature of money demand studies by improving the power performance of the relevant estimation and inference procedures. It reports fully modified OLS (FMOLS) estimation results of the money demand model for different data frequencies, to find varying signs and magnitudes of real income, interest rates and inflation elasticities of money demand for G6 nations.     

Why is Inflation in China a Monetary Phenomenon？

This paper proposes that inflation in China during the post‐reform era (1978 onwards) is always a monetary phenomenon. We construct a multivariate dynamic model based on Friedman's quantity theory of money and use the standard Granger causality test to show that money growth contains significant predictive power for inflation during the underlying period. The finding is robust to alternative measures of monetary aggregates and both closed and open economy frameworks. The baseline finding of the paper indicates that quantitative tools remain the most important policy instruments for China to manage its inflation effectively.     

Effect of Money Supply on Real Output and Price in China

Over the past 30 years, China has achieved remarkable long-term economic growth. Using quarterly data, we study the effects of money supply on real output and inflation in China between 1993 and 2008. To this end, we use money supply shocks afler filtering out the expected component of the money supply. Our findings provide evidence supporting the asymmetric effect of positive and negative money supply shocks on real output and inflation in China. That is, real GDP growth in China responds to negative money supply shocks but not positive money supply shocks. In addition, inflation responds to positive money supply shocks but not negative money supply shocks. We conclude that the People＇s Bank of China＇ s policy of steady monetary growth appears to be appropriate. Our study offers important policy implications for China.     

我国农产品价格与热钱的实证研究

自2005年中国汇率形成机制改革以来,热钱流入中国的话题就开始趋热。在2006年末,世界农产品价格大幅上涨,围绕粮食、食品的国内外投资和交易成为新的经济热点。鉴于最近中国农产品价格发生了强烈波动的事实和农产品市场的重要性,本文通过对热钱规模和农产品价格指数的月度数据进行实证分析,得出热钱与农产品价格存在均衡关系,是农产品价格变化的Granger原因。     

Supra-National Money and the Euro Crisis: Lessons from Karl Polanyi

The paper seeks to examine some of the key features of Karl Polanyi’s ideas explaining the collapse of the pre-Great Depression unregulated market system by using his broad framework of analysis, as developed in The Great Transformation and published over 70 years ago, to explain the present Eurozone crisis. Emphasis is placed on the two key institutions of the pre-Depression era, namely haute finance and the gold standard, as well as his heterodox views on the nature and origin of money to shed light on the evolving crisis within the Eurozone. On the basis of Polanyi’s insights, the paper concludes that the cause of the latter crisis is similar and it lies primarily in the adoption of stateless or supra-national money that is even more restrictive on the behaviour of national authorities than the conditions imposed under the gold standard. The current situation of quasi-permanent austerity in the Eurozone is the inevitable consequence of its monetary architecture, and it will remain a long-term feature of Europe, unless significant institutional changes are put in place to bridge the gap between money and the state.     

POST-KEYNESIAN MONETARY THEORY: SOME ISSUES

Abstract. Post-Keynesian monetary theory is of increasing interest to economists in the light of world-wide financial deregulation of financial markets. This paper offers an exposition of the main issues in this area, including an overview of the most divisive issue, that of interest rate determination, and hence, the slope of the money supply function. Post-Keynesian monetary theorists divide into two camps with respect to the determination of interest rates: the 'markup school'and the 'liquidity preference school'. It is argued in the paper that the post-Keynesian theory of the business cycle, which incorporates endogeneity of the money supply, requires a liquidity preference notion of interest rate determination.     

Monetising the Classical Equations: a theory of circulation

The Classical Equations describe output and income in real terms.To use them to analyse aggregate demand, the transactions theydescribe must be ‘monetised’. A sum of money equalto the wage bill of the capital goods sector can be shown tobe necessary and sufficient to carry out all transactions, ina process of circulation which also defines an expression forvelocity. When money has intrinsic value, the quantity approachmay hold in the short run but, in the long run, money will beendogenous. In these conditions, the rate of interest will bedetermined by the supply and demand for reserves, but when moneyis purely nominal, only a minimum rate will be fixed, and therate of interest will have to be pegged. The Appendix developsthe Classical Equations and shows that they define an invariableunit of account.