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How Stable Is The Demand For Money In China?

Author

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  • 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.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Yongqing Wang, 2007. "How Stable Is The Demand For Money In China?," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 32(1), pages 21-33, June.
    • Handle: RePEc:jed:journl:v:32:y:2007:i:1:p:21-33
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    References listed on IDEAS

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    Cited by:

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    2. Chen, Xiaohong & Wohlfarth, Paul & Smith, Ron P., 2021. "China's money demand in a cointegrating vector error correction model," Journal of Asian Economics, Elsevier, vol. 75(C).
    3. Nidhal Mgadmi & Helmi Hamdi & Houssem Rachdi, 2016. "Non-Linear Modelling of Money Demand in Tunisia: Evidence from the STAR Model," Economics Bulletin, AccessEcon, vol. 36(4), pages 1975-1985.
    4. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2018. "Policy Uncertainty and the Demand for Money in Korea: An Asymmetry Analysis," International Economic Journal, Taylor & Francis Journals, vol. 32(2), pages 219-234, April.
    5. Anne-Laure Delatte & Julien Fouquau & Carsten Holz, 2014. "Explaining money demand in China during the transition from a centrally planned to a market-based monetary system," Post-Communist Economies, Taylor & Francis Journals, vol. 26(3), pages 376-400, September.
    6. Lee, Chien Chiang & Chang, Chun Ping, 2012. "The Demand for Money in China: A Reassessment Using the Bounds Testing Approach," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 74-94, March.
    7. Budha, Birendra, 2012. "A multivariate analysis of savings, investment and growth in Nepal," MPRA Paper 43346, University Library of Munich, Germany.
    8. repec:zbw:bofitp:2011_027 is not listed on IDEAS
    9. Muhammad Ahad, 2017. "Financial Development and Money Demand Function: Cointegration, Causality and Variance Decomposition Analysis for Pakistan," Global Business Review, International Management Institute, vol. 18(4), pages 811-824, August.
    10. Boucekkine, R. & Laksaci, M. & Touati-Tliba, M., 2021. "Long-run stability of money demand and monetary policy: The case of Algeria," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    11. 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.
    12. Phouphet Kyophilavong & Gazi Salah Uddin & Muhammad Shahbaz & Charles Harvie & Teerawat Charoenrat, 2019. "Money Demand in a Dollarized Economy: Evidence from Laos PDR," Asian Economic Papers, MIT Press, vol. 18(1), pages 99-115, Winter/Sp.
    13. Birendra Bahadur Budha, 2014. "The Role of Expenditure Components in Nepal’s Import from India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 15(1), pages 37-54, March.
    14. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611.
    15. repec:idn:jimfjn:v:3:y:2018:i:specialissued:p:1-16 is not listed on IDEAS
    16. Anne-Laure Delatte & Julien Fouquau & Carsten Holz, 2014. "Explaining money demand in China during the transition from a centrally planned to a market-based monetary system," Post-Communist Economies, Taylor & Francis Journals, vol. 26(3), pages 376-400, September.
    17. Zuo, Haomiao & Park, Sung Y., 2011. "Money demand in China and time-varying cointegration," China Economic Review, Elsevier, vol. 22(3), pages 330-343, September.
    18. Mouyad Alsamara & Zouhair Mrabet, 2019. "Asymmetric impacts of foreign exchange rate on the demand for money in Turkey: new evidence from nonlinear ARDL," International Economics and Economic Policy, Springer, vol. 16(2), pages 335-356, April.
    19. Maulana Rifki Aditia & Eko Fajar Cahyono, 2018. "Responsiveness Of Social Values And Real Gross Domestic Bruto On Money Demand In Indonesia," Journal of Islamic Monetary Economics and Finance, Bank Indonesia, vol. 3(Special I), pages 63-78, May.
    20. 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.
    21. Delatte, Anne-Laure & Holz, Carsten, 2013. "Understanding Money Demand in the Transition from a Centrally Planned to a Market Economy," CEPR Discussion Papers 9721, C.E.P.R. Discussion Papers.
    22. repec:wyi:journl:002133 is not listed on IDEAS
    23. Baharumshah, Ahmad Zubaidi & Mohd, Siti Hamizah & Mansur M. Masih, A., 2009. "The stability of money demand in China: Evidence from the ARDL model," Economic Systems, Elsevier, vol. 33(3), pages 231-244, September.
    24. Birendra Bahadur Budha, 2011. "An Empirical Analysis of Money Demand Function in Nepal," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 23(1), pages 54-70, April.
    25. 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.

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    More about this item

    Keywords

    Money Demand; China; Bounds Testing; Stability;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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