Abstract
China is viewed as the pillar of Emerging Market Economies (EMEs), deems to surpassed United State, and become the topmost industrialized country in the world with the prospects of major shift in the future world power. However, growth rate has slow down since the third quarter of 2014. Through this paper, we aim at investigating the impacts of monetary policy on industrial sector growth, and determine whether the long-run industrial sector growth in China can be foster by the effectiveness of monetary policy. It also examines the interrelationships among the variables employed and determines the steady-state relationships between industrial sector growth and monetary policy. Time-series econometric techniques such as unit roots, ARDL and ECM are employed to monthly data for the year 1994:1 to 2013:12.According to the empirical results derived, the effectiveness of monetary policy significantly affects industrial sector growth and the short-run impact of monetary policy on industrial output production is established.
Highlights
The issue of how monetary policy affects industrial sector growth and stimulates output has been widely debated over the years
The empirical findings reveal that there exists a short-run relationship between industrial sector growth and monetary policy in China during the period under review
It can be deduced from the results that monetary policy variables have a significant impact on the industrial sector growth in China
Summary
The issue of how monetary policy affects industrial sector growth and stimulates output has been widely debated over the years. While it is generally agreed upon that monetary policy impacts economic activities and industrial sector growth, others have different views on the extent to which the phenomenon occurs. Imports were down, dropping 8.1% in July from a year earlier, after a decline of 6.1% in June, pointing to a slowdown in demand from Chinese industries for raw materials. This led to a surprise move by the monetary authority to lower by 2% the value of its currency
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