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How Stable Is The Demand For Money In China?

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Author Info

  • Mohsen Bahmani-Oskooee

    ()
    (The Center for Research on International Economics and The Department of Economics, The University of Wisconsin-Milwaukee)

  • Yongqing Wang

    (The University of Wisconsin-Milwaukee)

Abstract

Different authors have tried to estimate the demand for money in different countries. A common theme of almost all studies since 1987 is the application of cointegration technique. The demand for money in China is no exception and has received some attention by researchers. However, finding of cointegration has been interpreted as a sign of constancy of parameter estimates. In this paper we employ CUSUM and CUSUMSQ tests in conjunction with cointegration analysis to show that both M1 and M2 are cointegrated with their determinants. The results of stability tests reveal that while M1 money demand in China is stable, there is some doubt about stability of M2 money demand.

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Bibliographic Info

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 32 (2007)
Issue (Month): 1 (June)
Pages: 21-33

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Handle: RePEc:jed:journl:v:32:y:2007:i:1:p:21-33

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Related research

Keywords: Money Demand; China; Bounds Testing; Stability;

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References

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  1. Ma, Guonan, 1993. "Macroeconomic disequilibrium, structural changes, and the household savings and money demand in China," Journal of Development Economics, Elsevier, vol. 41(1), pages 115-136, June.
  2. Feltenstein, Andrew & Farhadian, Ziba, 1987. "Fiscal Policy, Monetary Targets, and the Price Level in a Centrally Planned Economy: An Application to the Case of China," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 19(2), pages 137-56, May.
  3. Chen, Chien-Hsun, 1989. "Monetary aggregates and macroeconomic performance in Mainland China," Journal of Comparative Economics, Elsevier, vol. 13(2), pages 314-324, June.
  4. Adam, Christopher S, 1991. "Financial Innovation and the Demand for LM3 in the UK 1975-86," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(4), pages 401-24, November.
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Cited by:
  1. repec:wyi:journl:002133 is not listed on IDEAS
  2. repec:nrb:journl:v:23:y:2011:i:1:p:4 is not listed on IDEAS
  3. Budha, Birendra, 2012. "A multivariate analysis of savings, investment and growth in Nepal," MPRA Paper 43346, University Library of Munich, Germany.
  4. Birendra Bahadur Budha, 2011. "An Empirical Analysis of Money Demand Function in Nepal," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 23(1), pages 54-70, April.
  5. Adnan Haider & Asad Jan & Kalim Hyder, 2013. "On the (Ir)Relevance of Monetary Aggregate Targeting in Pakistan: An Eclectic View," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 18(2), pages 65-119, July-Dec.
  6. Birendra Bahadur Budha, 2012. "A Panel Data Analysis of Foreign Trade Determinants of Nepal: Gravity Model Approach," NRB working Paper 12/2012, Nepal Rastra Bank, Research Department.

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