Monetary growth and inflation in China: A reexamination

Using the notion of cointegration theory and its implied vector error corre ction modeling strategy, this paper reexamines the relationship between mon etary forces and inflation in mainland China. Contrary to most recent resea rch in this area, these results based on unit root and cointegration tests indicate a reliable long-run relationship between the general price level a nd the money stock, as well as between inflation and monetary growth. Our f indings also suggest a bi-directional or feedback relationship between infl ation and monetary growth, (C) 1999 Academic Press.