The Relevance of M2 and GDP: Comparative Analysis of US, China, and Japan

In the circumstances of the post-pandemic period, a lot of economic bodies are facing the problem of economic recession. Meanwhile, monetary policy is playing a key role in the restoration of economic growth. This paper will do an overview of the current monetary policy and economic situation of three countries (namely, the US, China, and Japan), then investigate and decide the monetary policy that should be applied by different countries. To solve the problem, this paper will use the Granger Causality test to test how the currency supply and the GDP of a country will correlate and affect each other. This paper will collect data from the FRED from these countries, dated from 1999 to 2024. This paper will also collect an analysis of the current economic policies and discuss whether they are effective or not. After the analysis, it could be reached to a conclusion that the M2 of China and Japan is the Granger cause of the GDP of the two countries, while the US has an opposite trend, where the GDP of the US is the Granger cause of the USs M2. To push this investigation further, researchers could investigate the result of the test at different periods so that a dynamic conclusion could be reached.