Keywords
VAR
Monetary policy transmission
Submitted : 2025-08-13
Accepted : 2025-08-28
Published : 2025-09-12
Abstract
This study examines the mechanisms through which China’s virtual economy impacts the relationship between money supply and inflation. The study constructs a VAR model and conducts Granger causality tests using data collected from 2010 to 2025. The analysis comparatively investigates the differential effects of money supply changes on key virtual economy sectors, that specifically equity markets and real estate markets. This study reveals a bidirectional causal relationship between China’s stock market and M1 money supply, exerting a significant influence on monetary structure. The real estate market demonstrates a pronounced diverting effect on M2, which indirectly impacts the CPI. Virtual economy attenuates the positive correlation between money supply and inflation established by the Fisher Effect, forming a complex mechanism characterized by asymmetric responses under specific conditions.
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