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ID: 082639

Excess liquidity and inflation dynamics in China: 1997-2007 / Zhang, Chengsi; Pang, Hong

Zhang, Chengsi	Journal Article
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2008.

Key Words

Inflation ; Monetary Policy ; Capital Inflow ; Excess Liquidity

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ID: 108393

Excess liquidity, housing price booms and policy challenges in / Guo, Shen; Li, Chen

Guo, Shen	Journal Article
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2011.

Summary/Abstract

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 economic 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.

Key Words

Excess Liquidity ; Discretionary Monetary Policy ; Housing Price Boom ; Time Inconsistency

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ID: 138903

Is there excess liquidity in China? / Liu, Tie Ying; Su, Chi Wei ; Jiang, Xu Zhao ; Chang, Tsangyao

Chang, Tsangyao	Article
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Summary/Abstract

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.

Key Words

Excess Liquidity ; Bubbles ; Generalized Sup Augmented Dickey – Fuller Test ; Money llusion ; Sup Augmented Dickey – Fuller Test

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