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Chinese liquidity increases and the U.S. economy


Kang, W and Ratti, RA and Vespignani, J, Chinese liquidity increases and the U.S. economy, Economic Modelling, 52, (Part B) pp. 764-771. ISSN 0264-9993 (2016) [Refereed Article]

Copyright Statement

2015 Elsevier B.V. All rights reserved.

DOI: doi:10.1016/j.econmod.2015.10.015


China has been a major contributor to increased global liquidity over the past twenty years, with increases in liquidity being associatedwith increases in the price ofmost assets including commodity prices. This paper investigates the influence of liquidity shocks in China on the U.S. economy. The influence on the U.S. is through China's influence on demand for imports, particularly that of commodities. In all models a positive innovation in China's liquidity is associatedwith: 1) a positive and statistically significant effect on oil and commodity prices that builds up rapidly over three months and then persists for twentymonths; 2) a positive and statistically significant effect on U.S. CPI inflation that builds up over about sixmonths or so and then persists; and 3) a statistically significant depreciation of the real trade-weighted U.S. currency after about two or three months that achieves maximum absolute value after five to eight months and that then persists.

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Applied economics
Research Field:International economics
Objective Division:Economic Framework
Objective Group:International trade policy
Objective Field:International trade policy not elsewhere classified
UTAS Author:Vespignani, J (Associate Professor Joaquin Vespignani)
ID Code:104799
Year Published:2016 (online first 2015)
Web of Science® Times Cited:2
Deposited By:Faculty of Business
Deposited On:2015-11-20
Last Modified:2018-03-07

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