The Correlation of Economic Fluctuations of Modern China and the Foreign Countries and the Analysis of Monetary Reason
|Keywords||Modern Times Economic Fluctuation Correlation Price Index Silver Standard|
The business cycle is a very important characteristic of modern economy. Considering that the economy of modern China is semi-colonial economy and is affected heavily by foreign countries, such as U.K and U.S.A, the economy of modern China should fluctuate as the foreign economies. There should be a significant correlation in economic fluctuations of modern China and the foreign countries. Intuitionally, however, the economic fluctuations between modern China and the foreign countries show less correlation. The fluctuating track of Chinese economy in modern times seems unique.The business cycle of modern China and the foreign countries which formerly reveals less correlation shows a significant correlation, when the foreign Wholesale Price Index is changed into the foreign Wholesale Price Index in silver according to the current silver price. This is not an accident, and illuminates that there is an internal relation between Chinese and foreign business cycles. By analyzing the correlation from monetary angle, this paper tries to reveal the interior relation.In term of the detailed and credible Wholesale Price Index between China and foreign countries, this paper explores the correlation between Chinese and foreign business cycles from 1867 to 1937. At first, by using the Hodrick-Prescott Filter, this assay gets the cycle in the series of Wholesale Price Index and the shape of business cycles. By measuring and comparing the correlation of economic fluctuations between the price in gold and the price in silver, this paper reveals that when the foreign Wholesale Price Index is changed into the foreign Wholesale Price Index in silver according to the current silver price, the business cycle of modern China and the foreign countries which formerly reveals less correlation shows a significant correlation. Then Granger Causality Test is implemented on the sino-alien business cycles which are based on the price in sliver. The result discloses that the Chinese economic fluctuations are significantly affected by the foreign while the reverse is not clear. At last, from the monetary angle, such as the monetary standard and the foreign trade of silver, this paper analyzes reasons that the correlation of sino-alien economic fluctuations is affected by the currency. After analyzing the reason that the correlation is highly affected by money, the fluctuating law can be found behind the unique track of Chinese business cycles.