1. MONETARY POLICY AND INFLATION: A CASE STUDY BY HAO JIN DISCLAIMER: OPINIONS EXPRESSED IN THIS PRESENTATION ARE SOLELY MY OWN AND DO NOT EXPRESS THE VIEWS OR OPINIONS OF THE INSTITUTIONS THAT I AM AFFILIATED WITH.

2. FACTS ABOUT RECENT CHINESE MONETARY POLICY In 2012, China’s GDP accounts for 8% of total world GDP. China’s money stock, measured by M2, accounts for 27% of total world money stock. During 2012, Chinese M2 grows by $2.1 trillion, roughly accounts for half of the total world money growth.

3. INTERNATIONAL COMPARISON OF M2/GDP

4. INTERNATIONAL COMPARISON OF MONEY GROWTH

5. POPULAR ARGUMENTS IN CHINESE MEDIA

6. IS CHINESE CENTRAL BANK PRINTING MONEY? M2 is high Stock vs. Flow M2 growth rate is high Banks can create money Chinese Central Bank is not necessarily printing money, but is likely conducting expansionary monetary policy.

7. IS INFLATION RATE IN CHINA GOING TO BE HIGH?

8. WHEN HYPERINFLATION IS LIKELY TO HAPPEN? Self-fulfilling: Expect inflation to happen Want to get rid of paper money (velocity increases) Central Bank Independence War finance: German (1920s), China (WWII), Zimbabwe (2006-2008) Political Influences