The empirical analysis applies the
autoregressive distributed lag bounds testing approach to investigate the relationship between money supply, inflation and economic growth in China with the time series data from 1980 to 2018, estimate the
cointegration of monetary and economic growth in long-run relationship and uses
vector error correction model to determine the short-run adjustment between the
variables. The research showed that the increase in national income met
people's demand for goods and eased inflationary pressures. The results support
the view of monetarism and help the government formulate economic policies in a
prudent manner to control inflation in China.
JEL classification numbers: A10,
Keywords: ARDL bounds
test, Long-Run, Monetary Neutrality.