Financial development and relationship evolvement among money supply, economic growth and inflation: a comparative study from the U.S. and China. Issue 10 (25th February 2017)

• Record Type: Journal Article
• Authors: Lu, Xiaolin; Guo, Kun; Dong, Zhi; Wang, Xuan
• Is Part Of: Applied economics. Volume 49:Issue 10(2017)
• Page Start: 1032
• Page End: 1045
• Publication Date: 2017-02-25
• Subjects: Money supply -- economic growth -- inflation -- economic financialization; C51 -- E51 -- G10; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2016.1210776
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: With the rapid development of financial markets, economic financialization degree can no longer be ignored for its influence on the relationship among money supply, economic growth and inflation. Combined with the horizontal comparison of China, this article concentrates on the financial development and evolution from the period of industrialization to economic financialization in the U.S., systematic and comprehensive analysis is first done on the variation of overall economic operation. Then impulse response function based on VAR model is applied to study the dynamic influence of economic financialization degree on the relationship evolvement. The empirical results show that economic financialization makes good explanation of the deviating phenomenon among money supply, economic growth and inflation, and the interactive relationship between fictitious economy and real economy is becoming closer and closer. Furthermore, compared to the U.S., China still belongs to the process of transforming from the period of industrialization to economic financialization.