The demand for money in China : monetization, cointegration and stability

Abstract

Probably as a consequence of the increasing importance of the monetary sector in China, a considerable number of studies have been devoted to estimate the money demand functions of the country. However, most of these studies have failed to address the three important aspects of money demand functions altogether. The three aspects that the money demand function must consider for the case of China are: (I) the structural change in the economy, (ii) the non-stationarity of the data observed in China and (iii) the stability of the estimated models. The present study attempts to confront these problems.