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Cross wavelet Analysis for the Time–frequency Effects of Money Supply and Consumption Volatility

Xiwen Qin, Fengze Cai, Xiaogang Dong

Abstract


The time-frequency effects between money supply and consumption is a well-known topic in macroeconomic fields. We use cross wavelet analysis to decompose the time–frequency effects of Chinese money supply and consumption. We argue that the relation between money supply and consumption in detail. It illustrates the empirical evidence about the macroeconomic effects of money supply. It shows that money supply increases lead consumption increases across different time and frequencies. The results have some guidance that monetary policy reinforced the recessionary effects of the consumption volatility.

Keywords


Money Supply; Time–frequency analysis; Empirical Mode Decomposition; Cross wavelet; Wavelet coherency.

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