Money Supply, Economic Growth and Inflation of China: 1998-2007

The empirical analysis on the relationship among money supply, economic growth, and inflation in china from 1998 to 2007 with co-integration and Granger Causality test approaches shows: there is no co-integration relationship among money supply, inflation, and economic growth, but there is co-integration relationship between money supply and inflation while there is no co-integration relationship between money supply and economic growth. There is contradiction between the goal of economic growth and of price stability in China. We may be able to implement a loose monetary policy in the short run, but we should seek a new source to stimulate economic growth other than monetary policy in the long run.