This paper investigates the role of the global excess liquidity for macroeconomic variables, especially asset prices and external imbalance in China. We estimate structural VAR model and find evidence that the surge in global liquidity has limited effects on China's price level, output and asset prices. By inspecting the structural decomposition, we find that global output and inflation shocks affect domestic macroeconomic fluctuation. Using sign restrictions, we estimate the impacts of three structural shocks in driving the external imbalance and find that the global excess liquidity is a relevant factor while the shock to financial market may be a more important role in explaining the external imbalance than productivity shock. / Sun, Yun. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2012. / Includes bibliographical references (leaves 57-63). / Electronic reproduction. Hong Kong : Chinese University of Hong Kong, [2012] System requirements: Adobe Acrobat Reader. Available via World Wide Web. / Chapter 1. --- Introduction --- p.1 / Chapter 1.1. --- Introduction --- p.2 / Chapter 1.2. --- Theoretical background --- p.6 / Chapter 2. --- Data and methodology --- p.14 / Chapter 2.1. --- Data description --- p.14 / Chapter 2.2. --- Methodology --- p.16 / Chapter 3. --- Results and Interpretation --- p.21 / Chapter 3.1. --- Domestic SVAR results --- p.21 / Chapter 3.2. --- A global SVAR analysis for China --- p.35 / Chapter 4. --- Three structural shocks and global imbalance --- p.47 / Chapter 4.1. --- Sign restrictions analysis --- p.47 / Chapter 4.2. --- Empirical Evidence --- p.50 / Chapter 5. --- Conclusion --- p.54 / Chapter A. --- Data --- p.64