Empirical Analysis on Monetary Liquidity Spillover between China and Japan
Empirical Analysis on Monetary Liquidity Spillover between China and Japan
Author：Pang Xiaobo,Liang Fengbo,Li Yanhui Journal：Contemporary Economy of Japan Date：2009(3)
Keywords Monetary liquidity;F-MModel;Liquidity Spillover;Johansen Cointegration Test;Impulse Responses;Variance Decomposition
Abstract
The expansion of economic cooperation between China and Japan exerts a spill-over effect on monetary liquidity of the two countries.This paper develops an econometric model basing on M-Fmodel.The empirical results show that Shocks on Japanese monetary liquidity Granger cause Chinese money supply and general prices Indicating a spill-over effect running from Japan to China We argue that Chinese liquidity control should scrutinize the change of international monetary liquidity,reduce the expectation of RMB appreciation,increase the flexibility of RMB, and steadily improve the formation mechanism of RMB exchange rate.
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