Does Inflation Variability Affect the Demand for Money in China? Evidence from Error-Correction Models
Theory suggests that inflation variability should affect real money balances, although there is ambiguity about the sign of the effect. Using cointegration and vector-error correction (VEC) modeling techniques, this paper presents new evidence on the effect of inflation variability on the demand for real money balances in China. The major result shows that increases in the inflation variability exert a significant effect upon money demand in both the short-run and the long-run. [E41]
Volume (Year): 14 (2000)
Issue (Month): 1 ()
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