A composite model of macro-economic functioning of China

A composite model of macroeconomic variables was constructed to simulate the quantitative relationships among economic growth, money supply, and inflation, and to provide an evaluation tool for government economic decision-making. This model is a composite one in that it is combination of an Econometric Model and Neural Network Models. Simultaneous simulation of the composite model indicates that its accuracy is higher than a general Econometric Model. Results show that inflation had negative impact on money supply, and its impact on M2 is stronger than that on M1. Income and price elasticities of money supply bear the expected signs, and those of M2 are larger than those of M1, respectively. It also has been revealed that during the 1980 s inflation did not exert a significant impact on economic growth.