This paper proposes a new framework for the regime shifts analysis of business cycle, and the research focus on the relationship between economic growth and monetary policy medi-index in the business cycle transitions. It shows that there is cointegration relationship between the economic growth rate and the M1 increase rate. Then by using the Cointegration, Granger Causality Method, Impulse-Response Analysis, Vector Error Correction Model with Markov Regime Switching to test the equilibrium relationship in long run and the short fluctuation pattern in short run between the real output and M1 increase rate, it shows that monetary supply can affect the macroeconomic effectively, and the interest rate and stock market value can not affect the macroeconomic effectively. |