China's money demand in a cointegrating vector error correction model

Xiaohong Chen (), Paul Wohlfarth and Ronald Smith

Journal of Asian Economics, 2021, vol. 75, issue C

Abstract: This paper estimates open-economy macroeconomic models of the Chinese economy allowing for the structural change caused by the 1992 reforms. Unrestricted vector autoregressions, VARs, and cointegrating vector error correction models, VECMs, are estimated on quarterly data for the early reform period 1980–1992, and the late reform period, 1993–2018. Two long-run cointegrating vectors are identified, which can be interpreted as a long-run, money demand function and a long-run IS type income equation driven by export demand. The 1992 reforms involved a move to a more market oriented system and a transformation of financial institutions and this seems to be responsible for a change in the direction of effect of interest rates in both the IS and LM relationships.

Keywords: Money demand; Cointegration; China (search for similar items in EconPapers)
JEL-codes: C32 E51 P34 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007821000671
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:asieco:v:75:y:2021:i:c:s1049007821000671

DOI: 10.1016/j.asieco.2021.101338

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().