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An Empirical Study on Foreign Exchange Assets and Monetary Base Endogeneity of China Based on the Monetary Base Supply Structure

  • Shui Qing Yang
  • Peng Zhang
  • Dong Wang
Part of the Communications in Computer and Information Science book series (CCIS, volume 208)

Abstract

Based on the monetary base supply structure, the relationship between monetary base and its components from December 1999 to August 2010 of China are explored by cointegration analysis, Granger causality, VAR models and other methods. The results show that issuing notes and withdrawing re-lending financial institutions have been important means of hedging the increasing net foreign assets, net foreign assets is the main Granger cause of the changes in monetary base and China’s current money supply is endogenous obvious. Therefore, the government should widen the RMB exchange rate floating space and promote RMB internationalization process, try to solve the problem of increasing foreign exchange assets fundamentally.

Keywords

Monetary Base Supply Structure Foreign Exchange Assets Monetary Endogeneity 

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Copyright information

© Springer-Verlag Berlin Heidelberg 2011

Authors and Affiliations

  • Shui Qing Yang
    • 1
  • Peng Zhang
    • 2
  • Dong Wang
    • 3
  1. 1.School of Economy and TradeHunan UniversityChangshaChina
  2. 2.School of Property, Construction and Project ManagementRMIT UniversityMelbourneAustralia
  3. 3.Department of Civil EngineeringQingdao Technological University Qindao CollegeQing DaoChina

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