The surge in international capital inflows and the remarkable excess liquidity in China between 1997and 2007are examined in the present paper. It is shown that China＇s improved position in terms of foreign exchange p...The surge in international capital inflows and the remarkable excess liquidity in China between 1997and 2007are examined in the present paper. It is shown that China＇s improved position in terms of foreign exchange purchases, ignited by huge foreign capital inflows, has effectively induced excess liquidity in China. More importantly, by developing an econometric madel for inflation and excess liquidity, the present study demonstrates that excess liquidity has imposed significant pressure on inflation in China over the past 10 years. This finding suggests that excess liquidity in China has not only contributed to the rise in stock prices and the real estate market boom, but also affected the consumer goods market. The potential transmission mechanism of liquidity-driven inflation and policy implications of the findings of this study are discussed.展开更多
This paper considers five indicators of excess liquidity to verify its existence in China. Based on the analysis, we argue that the People＇s Bank of China and other banks in China are responsible for the excess liqui...This paper considers five indicators of excess liquidity to verify its existence in China. Based on the analysis, we argue that the People＇s Bank of China and other banks in China are responsible for the excess liquidity in China. Other factors, such as the excess savings resulting from the poor social security network, the asset bubble and the foreign exchange system, fuel banks with abundant liquidity. To tackle the problem of excess liquidity and direct capital into productive sectors, the traditional use of monetary policy alone is not sufficient. The semi-administrative tool ＂window guidance＂ and other macroeconomic control methods are required.展开更多
Incorporating asymmetric cost and benefit of supplying excess liquidity into an otherwise standard time inconsistency model this paper offers an explanation of the excess liquidity and housing price booms recently exp...Incorporating asymmetric cost and benefit of supplying excess liquidity into an otherwise standard time inconsistency model this paper offers an explanation of the excess liquidity and housing price booms recently experienced in China. We find that the central bank＇s incentive to stimulate eeonomie growth with excess liquidity fuels real estate prices and accelerates inflation bias. Therefore, the central bank should free itself from the pressure to achieve an economic growth rate higher than the potential level and assign an appropriate weight to the real estate price fluctuations in the central bank＇s objective function, so that the central bank ＂s policy of stimulating economic growth with excess liquidity can be constrained.展开更多
In this paper, we developed the recursive unit root tests proposed by Phillips et al. （2013） and used them to identify the beginning and the end of potential excess liquidity in the Chinese monetary market during th...In this paper, we developed the recursive unit root tests proposed by Phillips et al. （2013） and used them to identify the beginning and the end of potential excess liquidity in the Chinese monetary market during the period from 1992 to 2013. The result indicates that excess liquidity existed from the third quarter of 2002 to 2013. The analysis shows that since 2003, the inflationary pressure of excess liquidity has remained high. We provide evidence supporting the money illusion hypothesis in China. The recursive unit root test is suited to practical implementation with time series and delivers a consistent date-stamping strategy for determining the origination and termination of multiple bubbles. Simulations show that the test significantly improves discriminatory power and leads to distinct power gains.展开更多
China＇s current inflation differs from that of the 1980s. The Current inflation is being caused by factors from both the supply and demand sides, and should therefore be addressed from both sides as well With a new p...China＇s current inflation differs from that of the 1980s. The Current inflation is being caused by factors from both the supply and demand sides, and should therefore be addressed from both sides as well With a new policy analysis framework, we suggest that China now needs to adopt a policy combination of ＂supply expansion and demand tightening.＂ Demand tightening should mainly rely on the policy of quantitative monetary tightening, which specifically includes further tightening of capital controls and encouragement of outbound investment. Supply expansion should mainly rely on policies of tax cuts, Renminbi appreciation, reform, improvement of administration, and technological progress.展开更多
基金National Social Science Fund (No.08CJY048)the research funding from the"985 Project"of Renmin University of China with Grant No.21353232
文摘The surge in international capital inflows and the remarkable excess liquidity in China between 1997and 2007are examined in the present paper. It is shown that China＇s improved position in terms of foreign exchange purchases, ignited by huge foreign capital inflows, has effectively induced excess liquidity in China. More importantly, by developing an econometric madel for inflation and excess liquidity, the present study demonstrates that excess liquidity has imposed significant pressure on inflation in China over the past 10 years. This finding suggests that excess liquidity in China has not only contributed to the rise in stock prices and the real estate market boom, but also affected the consumer goods market. The potential transmission mechanism of liquidity-driven inflation and policy implications of the findings of this study are discussed.
文摘This paper considers five indicators of excess liquidity to verify its existence in China. Based on the analysis, we argue that the People＇s Bank of China and other banks in China are responsible for the excess liquidity in China. Other factors, such as the excess savings resulting from the poor social security network, the asset bubble and the foreign exchange system, fuel banks with abundant liquidity. To tackle the problem of excess liquidity and direct capital into productive sectors, the traditional use of monetary policy alone is not sufficient. The semi-administrative tool ＂window guidance＂ and other macroeconomic control methods are required.
文摘Incorporating asymmetric cost and benefit of supplying excess liquidity into an otherwise standard time inconsistency model this paper offers an explanation of the excess liquidity and housing price booms recently experienced in China. We find that the central bank＇s incentive to stimulate eeonomie growth with excess liquidity fuels real estate prices and accelerates inflation bias. Therefore, the central bank should free itself from the pressure to achieve an economic growth rate higher than the potential level and assign an appropriate weight to the real estate price fluctuations in the central bank＇s objective function, so that the central bank ＂s policy of stimulating economic growth with excess liquidity can be constrained.
文摘In this paper, we developed the recursive unit root tests proposed by Phillips et al. （2013） and used them to identify the beginning and the end of potential excess liquidity in the Chinese monetary market during the period from 1992 to 2013. The result indicates that excess liquidity existed from the third quarter of 2002 to 2013. The analysis shows that since 2003, the inflationary pressure of excess liquidity has remained high. We provide evidence supporting the money illusion hypothesis in China. The recursive unit root test is suited to practical implementation with time series and delivers a consistent date-stamping strategy for determining the origination and termination of multiple bubbles. Simulations show that the test significantly improves discriminatory power and leads to distinct power gains.
文摘China＇s current inflation differs from that of the 1980s. The Current inflation is being caused by factors from both the supply and demand sides, and should therefore be addressed from both sides as well With a new policy analysis framework, we suggest that China now needs to adopt a policy combination of ＂supply expansion and demand tightening.＂ Demand tightening should mainly rely on the policy of quantitative monetary tightening, which specifically includes further tightening of capital controls and encouragement of outbound investment. Supply expansion should mainly rely on policies of tax cuts, Renminbi appreciation, reform, improvement of administration, and technological progress.
