Cao, Ziyi and Ou, Zhirong ![]() |
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Abstract
A measure of the degree of debt monetisation is constructed for its impact on the business cycle to be studied in a standard VAR model. Debt monetisation is hardly stimulative, as it raises public demand that crowds out almost as much demand from the private sector. However, it generates inflation, presumably because of inflationary expectations. Nevertheless the impact of debt monetisation on the business cycle dynamics is trivial, due to the low efficiency of the monetary transmission mechanism. Unless policy proposals are for extraordinarily aggressive moves, or they are accompanied by monetary reforms which facilitate monetary transmission, the recent debate on debt monetisation, we argue, possesses more theoretical meaning than practical meaning for China’s post-Covid recovery.
Item Type: | Article |
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Date Type: | Publication |
Status: | Published |
Schools: | Business (Including Economics) |
Subjects: | H Social Sciences > H Social Sciences (General) |
Publisher: | Economic Issues Education Trust |
ISSN: | 1363-7029 |
Date of First Compliant Deposit: | 10 September 2021 |
Date of Acceptance: | 14 August 2021 |
Last Modified: | 06 Dec 2023 09:54 |
URI: | https://orca.cardiff.ac.uk/id/eprint/143422 |
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