Economics
China Money Supply Moves Growth More Than Rates in Fed Research
- Economists in U.S., China write in paper published by NBER
- Report: ‘Changes in M2 growth have considerably larger impact’
This article is for subscribers only.
Changes to China’s broad money supply have more of an impact on growth than interest rates, according to new forecasting models developed by Federal Reserve researchers.
Such a finding is contrary to the conventional wisdom about the importance of interest rates, which are more applicable to the U.S. and other developed economies, according to a working paper this month by Patrick Higgins and Tao Zha of the Atlanta Fed and Karen Zhong of Shanghai Jiaotong University.