Working Paper: NBER ID: w2143
Authors: Richard Portes; Anita Santorum
Abstract: This paper studies the relations between money and other macroeconomic variables as well as excess demand in the consumption goods market for the case of China, 1954-83. We explicitly recognize the endogeneity of money in the CPE and do not impose (but instead test) some common restrictive assumptions; we assess the extent of aggregate excess demand (supply) in a macroeconomic disequilibrium model; and we allow at the macro level for the possible coexistence of micro markets in different states of excess demand or supply (shortages or slacks). We find bidirectional causality between money and income; that M[sub0] behaves in a manner more suited to building simple, conventional models than does M[sub 2]; and that there has been a mixed pattern of excess supplies and demands over the three decades.
Keywords: money; macroeconomic variables; excess demand; consumption goods market; China
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| macroeconomic disequilibrium (D59) | consumption behavior (D10) |
| M0 (E41) | income (E25) |
| income (E25) | M0 (E41) |
| M2 (E51) | income (E25) |
| income (E25) | M2 (E51) |
| real income (D31) | price levels (E30) |