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首页 2004_Chow..Money_price_level_and_output_in_the_C…

2004_Chow..Money_price_level_and_output_in_the_Chinese_Macro_Economy.pdf

2004_Chow..Money_price_level_an…

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简介:本文档为《2004_Chow..Money_price_level_and_output_in_the_Chinese_Macro_Economypdf》,可适用于高等教育领域

Money,PriceLevelandOutputintheChineseMacroEconomyGregoryCChow*PrincetonUniversitygchowprincetoneduYanShenPekingUniversityyshenccereducnNovember,AbstractFollowingamonetaryhistoryoftheChinesemacroeconomy,anerrorcorrectionmodeltoexplaininflationfromtoispresentedthatpassestheChowtestofparameterstabilityinspiteofinstitutionalchangesAVARexplainingthelogsofpricelevel,outputandmoneysupplyyieldsimpulseresponsesthatsupporttheFriedmanpropositionthatoutputreactstomoneyshocksfirstbuttheeffectisshortlivedandpricesreactlaterbuttheeffectlastslongerAsimilarVARusingUSdatashowsthesamepatternofimpulseresponsesastheChinesecase,confirmingtheuniversalityoftheFriedmanpropositionasstatedinBernanke()*IwouldliketoacknowledgewiththankshelpfulcommentsfromMiltonFriedman,ChrisSimsandseminarparticipantsatPrincetonUniversityandfinancialsupportfromtheCenterforEconomicPolicyStudiesatPrincetonUniversityinconductingthisresearchIIntroductionThispaperpresentsanabridgedhistoryofChina’smacroeconomyfromtheearlystoItisabridgedbecauseonlythreemacroeconomicvariables,moneystockM,realoutputYandthepricelevelPareanalyzedThebasichypothesisconcerningthecomovementsofthesethreevariablesisduetotheworkofMiltonFriedman()Amajorpropositionguidingourworkisthatwhenmoneysupplyincreases,whateverthecause,realoutputwillfirstincreasebeforethepricelevelincreasesbutrealoutputwilldiedownmorerapidlythanpricesThispropositionwillbeusedtoexplainthechangesinthepricelevelandoutputinrelationtothechangesinmoneystockinChina’smacroeconomichistoryfromthestoThisisdoneinsectionIIInsectionIIIwewillexplainthepricelevelandinflationstatisticallybyfirstestimatingalinearregressionoflogPonlog(MP)Ifthisregressionisinterpretedasalongrunequilibriumrelation,oracointegratingrelation,betweenlogP,andlog(MY),theresidualscanbeinterpretedasdeviationsfromequilibriumorerrorsintheexplanationoflogP,tobedenotedbyuToexplaininflationasmeasuredby∆logP,weuseasexplanatoryvariablesitsownlaggedvalue,∆log(MY)andu(t)Thecoefficientofu(t)isexpectedtobenegativebecauseavalueoflogPaboveequilibriuminthelastperiodwilltendtodampenpriceincreaseinthecurrentperiodinthiserrorcorrectionequationtoexplaininflationThissectionupdatestheworkofChow()andfollowsthemethodologyofEngleandGranger()OneinterestingresultisthattheparametersofthiserrorcorrectionequationexplaininginflationaretemporallystablefromtoasconfirmedbytheChow()testusing,theyeareconomicreformstarted,asthebreakpointWeestimateinsectionIVaVARtoexplainthechangesinthethreevariables,logM,logPandlogY,denotedbythevectorxTheVARisavectorregressionof∆x(t)onx(t)and∆x(t)BythemaximumlikelihoodmethodofJohansen(),thecoefficientmatrixofx(t)isfoundtohaverankone,tobewrittenasab’Thevectorb’x(t)correspondstotheregressionoflogPonlog(MY)insectionIII,andturnsouttobesimilarnumericallyUsingthisVARwecomputetheimpulseresponsesoflogPandlogYtounexpectedchangesinMThedynamiceffectsarefoundtobeconsistentwiththemajorpropositionsofMiltonFriedmanstatedaboveontheeffectsofmoneysupplyonpriceandoutput,andasrecentlysummarizedinBernanke()SectionVcomparestheimpulseresponsesestimatedbyusingUSandChinesedatawithMreplacingM,andfindsthatthegeneralpatternsarequitesimilarinspiteoftheinstitutionaldifferencesbetweenthesetwocountriesSectionVIconcludesItisworthwhileintheintroductiontostatethepossiblecontributionofthispaperandthepositionthatwetaketoavoidpossiblemisunderstandingOnourpresentationofmonetaryhistoryalthoughthefactsarewellknownourinterpretationisperhapsoriginalandprovidesabackgroundfortheeconometricanalysistofollowOnthereliabilityofChinesedata,webelievethatthedataselectedarereliableforeconometricanalysisasillustratedbyexamplespresentedinChow()andelsewhereWeaskaskepticalreadertokeepandopenmindandseewhattheanalysisofthispaperwillshowConcerningthepossibleeffectofinstitutionalchangesafter,itisourpurposetofindoutwhethertheeffectsofmoneyonpricesandoutputandwhethertherelationbetweeninflationandtheratioofmoneysupplyandoutputremainedthesameaftereconomicreformThefactthatChinahadaplannedeconomybeforedoesnotruleoutthepossibilitythatthemechanismexplaininginflationremainsvalidJustwitnesstheinflationofoverpercentinwhichcouldbeexplainedbythelargereductioninoutputandasubstantialincreaseinmoneysupplyWhenthefirstauthorstartedusingtheerrorcorrectionmodeltoexplaininflationin,datauptoonlywereavailableandwereusedtoestimateanequationthatwascapableofpredictingin(beforethefact)–seeChow()forarevisedversionofthisstudyAlthoughtheVARmodelusediscrude,ithelpstosummarizethestatisticalpropertiesofthedataandshedslightonourmainquestionastowhethertheFriedmanempiricalpropositionisvalidThispapershouldnotbeviewedasacontributiontotestingamacroeconomictheorybasedonsoundmicrofoundations,butonlyasatestofanempiricalpropositionproposedbyFriedmanTheempiricalvalidityoftheFriedmanpropositionasstressedbyBernankee()fortheChineseeconomyappearstousasanimportantquestiontostudyWhenweestimateasimilarVARusingUSdatawedonotclaimthatthisisacontributiontomacroeconometricstudiesoftheUSOurpurposeistofindoutwhethertheempiricalvalidityoftheFriedmanpropositionuncoveredfromtheChinesedataisalsofoundusingsimilarUSdataIftheanswerispositive,wecanconcludethattheFriedmanpropositionisempiricallyvalidforbothChinaandtheUSevenwhentheconclusionisbasedoncrudeVARmodelsthatmayignoremanyimportantelementsofbotheconomiesWewilltesttherobustnessoftheimpulseresponsesintheUScasebyaddinginterestrateasanadditionalvariableIIABriefMonetaryHistoryoftheChineseMacroeconomyInthissectionweprovideabriefexplanationoftheimportantmovementsofpriceandoutputinresponsetochangesinmoneysupplywheremoneysupplyitselfcanbetheresultofotherfactorsThisisasimplifiedeconomichistorybutitcanbeinterestingtotheextentthatmoneysupplychangescanbeexplainedandtheresultingmovementsinpriceandoutputareconsistentwithFriedman’spropositionasstatedatthebeginningofthispaperWestartwithanexplanationofthelargepricechanges,andthenexplainthelargeoutputchangesTableprovidesfivesetsofdatafromto:GeneralretailpriceindexPattheendoftheyear(column),theinflationratemeasuredbytimesP(t)P(t)(column),realGDPindexY(column),Mattheendoftheyearinmillionyuan(column)andMattheendoftheyear(column)TablePriceLevelofChinaanditsDeterminantsYearGeneralretailpriceindexPtPtxGDPindexMMDataSources:ChinaStatisticalYearbook(),forgeneralretailpriceindex,(pp),GDPindex,–(pp),MandM,–(pp)The–datafortheindicesarealsofromearlieryearsofChinaStatisticalYearbookbutdirectlytakenfromChow(),pageThepreMisconstructedascurrencyincirculationplusdemanddepositsThepreMisapproximatedaslinkingcurrencyplussavingsdepositsdatawiththeofficialMseries,wherethelinkingfactoris(officialMof)(currencysavingsdepositsin)ToexplaininflationweconsideraweakformofthequantitytheoryofmoneybecausethefunctionalformofthequantityequationMv=PYmaynotbecorrectempiricallyTheweakformstatesthat,withYheldconstant,PtendstoincreaseasMincreaseswithMconstant,PtendstoincreaseasYdecreases,andPconstant,YtendstoincreaseasMincreasesThequantitytheoryasspecifiedbytheparticularfunctionalformofthequantityequationmaynotbeempiricallyvalideveninthelongrunforvariousreasonsFirst,interestrateaffectsvandmaynotbeconstantinthelongrunSecond,interpretedasademandformoneyequation(MP)=Yv,itimpliesanincomeelasticityofunitywhichmaybeempiricallyincorrectWetakefromthequantitytheorynottheexactquantityequationbutaweakerpropositionasstatedaboveToexplainPwefirstfindoutwhetherthevariableMhaschangediftherelativechangeinMismuchlargerthanthechangeinYWealsoexaminewhetherYhaschangedandifsoitisexpectedtohaveanegativeeffectonPThesebasicideasareusedtointerpretthemajorchangesinpricesandoutputinChinaTheexplanationisgivenverballyandinformallyinthissection,andmoreformallyinstatisticaltermsinthenextsectionWefirstexaminethemajorchangesinthepriceindexanditsrelationtochangesinMandpossiblytoY,thelatterassertinganegativeeffectThedataofTablerevealsthatallepisodesofinflationwereassociatedwithsubstantialincreaseintheratioMYInthepriceindexincreasedbypercentwhilemoneystock(measuredbyMinthisexpositionbutMwilldoaswell)increasedfromintoin,orbypercentandtherealoutputindexdecreaseddramaticallyfromintoinThedramaticdeclineinoutputwasaresultoftheeconomicfailureoftheGreatLeapForwardMovementthathadstartedinIntheeraofeconomicreformaftertherehavebeenepisodesofinflationin,,andMoneystockincreasedfromattheendoftoattheendof,orbypercentinthesetwoyears,moreinpercentagetermsthanforanyprevioustwoyearsTheinflationrateinwaspercentThereasonfortherapidincreaseinmoneystockwasthebankingreformpolicyintroducedintoallowthebanksmoreautonomytoextendcredits,perhapssimilartotheautonomyintroducedforstateownedenterprisesinthereformprocessFromtheendoftotheendofmoneystockincreasedfromtoorbypercentinthesetwoyearsThegovernmentdidnotslowdownthefairlyrapidincreaseinmoneysupplyperhapsbecauseitdidnotunderstandthemechanismofinflationaswespecifyinsectionIIITheinflationrateinwaspercentThereasonforthisinflationratetobehigherthantherateinisthedelayedeffectsofthesubstantialincreasesinmoneysupplyforseveralyearspriortowhilethepercentageincreasesintheyearspriortoweremuchsmallerIthasbeenobservedthatinflationin,togetherwithgovernmentcorruption,werethetwomajorcausesofdiscontentamongthepopulationandindirectlyofthetragicTiananmenIncidentonJune,FromtheendoftotheendofmoneystockincreasedfromtoorbyafactorofinyearsTheinflationratesin,andwere,andpercentrespectivelyThelargeincreasesinmoneystockintheseyearsweretheresultofDengXiaoping’sSouthernExpeditioninFebruaryinwhichhesetforthapolicyoffurtherreformandopeningandurgedrapiddevelopmentoftheeconomyBanksreceivedthegreenlighttoexpandcreditforinvestmentprojectsItwasZhuRongjiasGovernorofthePeople’sBankorCentralBankandlaterasVicePremierwhomanagedtostoptherapidincreaseinmoneysupplyafter(asseeninTable)HedidsomainlybytheadministrativemeansofassigningcreditquotastothePeople’sBanksofdifferentprovincesandsucceededinstoppinginflationAprovincialPeople’sbank’spresidentwouldlosehisjobifthecreditquotawereexceededWenextturnbrieflytotheeffectsonoutputassociatedwiththelargeincreasesinmoneysupplyintheaboveepisodesSincetheaveragerateofannualgrowthofrealoutputwasaboutpercentfromto,anyincreasemuchabovethataveragecanbeconsideredlargeOutputincreasedbyorpercentinandbyorpercentinwhenmoneysupplyincreasedveryrapidlyinItincreasedbyorpercentin,andbyorpercentinThisisapartofthehistoryofChina’seconomicfluctuationsasmeasuredbychangesintotaloutputThedatainTableterminatein,butmacroeconomicdevelopmentsuptothesecondquarterofarealsoconsistentwiththeFriedmanpropositionthatincreaseinmoneysupplyfirstleadstoincreaseinoutputandthentoincreaseinpricesMoneysupplyincreasedrapidlyinmainlyasaresultofthelargeinflowofforeignexchangesacquiredthroughlargetradesurplusandlargeinflowofforeigninvestmentTheacquiredforeignexchangewasconvertedintohighpowermoneyinthebanksThisledtorapidexpansionofmoneyandcreditandtoincreasesininvestmentandoutputinTheannualrateofincreaseinMwasaboutpercentinJanuary,rosetooverpercentattheendofandtooverpercentinmid,andwasreducedtoaboutpercentinthebeginningofChina’srealGDPincreasedatapercentrateinandapercentrateinthefirstquarterofascomparedwithpercentin(seeTable)Signsofinflationbegantoshowinthelastquarterof,withtherateofinflationrisingtopercentannuallyinApril(thehighestrateinsevenyears)InpresentingthisabridgedhistoryoftheChinesemacroeconomywehavetobeawareofthepossibleinaccuracyoftheChineseofficialdataonwhichourexpositionisbasedSupportfortheusefulnessandreliabilityofmostofficialChinesedatahasbeengiveninChow(,pp,,pp)TheaccuracyofthedatagiveninTablecanbeinferredpartlybyusingthemtointerpreteconomicrealitybasedonconfirmedeconomichypothesesTheabovediscussionoftheeffectofmoneyonpricesandoutputisanexample,whileotherexamplescanbefoundinChow()TheaccuracyofeconomicdataandthevalidityofwellacceptedeconomichypothesesinexplainingthedatahelptoreinforceeachotherThefactthatofficialoutputstatisticsinTableshowalargereductionofrealoutputinfromtosuggeststhatofficialstatisticiansarewillingtoreportlargeeconomicfailuresofChinaWehopethatthereaderwillbeabletoformabetterjudgmentontheaccuracyofthesedataafterreadingtheremainderofthispaperNeverthelessYoung()hasraisedquestionsontheaccuracyofChineseoutputdataHismainpointisthatifwedeflateoutputinmoneytermsbyitsimplicitdeflatortoobtainrealoutput,theestimateofincreaseinrealoutputistoolargeifthedeflatorunderestimatesthetrueinflationrateByreplacingtheoutputdeflatorbyanotherofficialpriceindex,suchastheretailpriceindexshowninhisTablefordeflatingoutputoftheSecondary(industrial)sector,wewillgetasmallerrateofgrowthofrealoutputThemostdramaticdifferencebetweenthetworesultsisfoundinYoung(,p)forthegrowthofGDPinwhenhisalternativeestimateshowsanegativepercentandtheofficialestimateshowsapositivepercent(fromTable,=)ThealternativeestimateisgrosslyinerrorFirst,theretailpriceindexinwasabnormallyhighaccordingtotheexplanationgiveninsectionIIIbelow(seeFiguresandandTableforthetwolargepositiveresidualsinandandtheverbalexplanationfollowingTable)Second,ChinaStatisticalYearbook(Tablesand)providesdataonoutputsinphysicalunitsofindividualindustrialproductsandmostofthemshowanincreaseinascomparedwithThird,China’srealGDPwasgrowingatpercentinandareductiontotheofficialrateofpercentinwasaverylargereductionPeacefuldemonstrationsdidnotstartuntilAprilandtheTiananmenIncidentoccurredonJune,Wecanreasonablyassumethatforthefirstsixmonthsof,realGDPwasincreasingatleastatpercentannuallyascomparedwithpercenttheyearbeforeTogetanegativegrowthofpercentfortheentireyearwouldrequireanannualrateofdeclineinoutputofaboutpercent(inthefirsthalfandinthesecondhalf)inthesecondhalfof,whichishighlyunlikelyMuchoftherevisionofoutputgrowthgiveninYoung()isduetothi

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