An empirical study on the relationship between China's output, inflation, and money supply

摘要

An econometric analysis on the stability of money demand and effectiveness of monetary policy is carried out under the traditional framework of the quantity theory of money. The research results are as follows: there exists only one co-integrating relationship between China's output, inflation and money supply; money supply is a weakly exogenous variable, thus suitable used as a monetary policy variable; money supply shock exerts real effects on output and inflation and monetary policy is effective.