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HOW STABLE IS THE DEMAND FOR MONEY IN CHINA?

Mohsen Bahmani-Oskooee () and Yongqing Wang
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Yongqing Wang: The University of Wisconsin-Milwaukee

Journal of Economic Development, 2007, vol. 32, issue 1, 21-33

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.

Keywords: Money Demand; China; Bounds Testing; Stability (search for similar items in EconPapers)
JEL-codes: E40 (search for similar items in EconPapers)
Date: 2007
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