Research on Money, Inflation and Economic Growth in China Based on DAG

Itpsilas a key problem for each country to balance and choose among money supply, inflation and economic growth. A DAG model can place restrictions on over recognitions of the innotion terms in a structural VAR model constituted by macroeconomic variables and can show the corresponding period and dynamic causality of economic variables at the same time. Using DAG model this paper finds that monetary supply is the corresponding period cause, short-term cause and long-term cause of GDP growth. This proves the monetary polices in China are unneutural. The short-term money has exogenesis; the long-term monetary supply has notable influence on Chinese economic growth, and the monetary market is influenced by the enforcement result of monetary policies. It is also discovered that the expansion of monetary supply may cause inflation, which means the monetary policies have the ability to influence the price; while the inflation has an uncertain short-term influence on economic growth and has certain long-term influence on economic growth.