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Chinese Monetary Expansion and the US Economy

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Vespignani, JL and Ratti, R (2013) Chinese Monetary Expansion and the US Economy. Discussion Paper. University of Tasmania. (Unpublished)

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Abstract

This paper examines the influence of monetary shocks in China on the U.S. economy over 1996-2012. The influence on the U.S. is through the sheer scale of China’s growth through effects in demand for imports, particularly that of commodities. China’s growth influences world commodity/oil prices and this is reflected in significantly higher inflation in the U.S. China’s monetary expansion is also associated with significant decreases in the trade weighted value of the U.S. dollar that is due to the operation of a pegged currency. China manages the exchange rate and has extensive capital controls in place. In terms of the Mundell–Fleming model, with imperfect capital mobility, sterilization actions under a managed exchange rate permit China to pursue an independent monetary policy with
consequences for the U.S.

Item Type: Report (Discussion Paper)
Keywords: repec, International monetary transmission, China’s monetary aggregates
Publisher: University of Tasmania
Additional Information:

Discussion Paper 2013-04. Copyright 2013 University of Tasmania

Date Deposited: 08 Aug 2013 23:23
Last Modified: 18 Nov 2014 04:53
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