Economic Reform and the Demand for Money in China

International Monetary Fund

No 1990/042, IMF Working Papers from International Monetary Fund

Abstract: Error correction models of the demand for a range of monetary aggregates in China are estimated with quarterly data for the period 1983–88. The estimated models fit the data reasonably well and appear to be relatively stable. Money demand is found to be sensitive to changes in expected inflation. In the case of currency, demand increases in the short term in response to an increase in expected inflation even though there is a fall in demand in the long run. A “cash-in-advance” explanation for this response pattern is suggested. It is also argued that the estimation results taken as a whole provide indirect evidence against the existence of substantial repressed inflation in China during the sample period. This is a working paper and the author would welcome any comments in the present text citatios should refer to a $$$n unpublished manuscript, mentioning the author and the date of issuance by the Internatinoal monetary Fund.

Keywords: WP; opportunity cost; price level; retail price index; household money balance; currency holding; China money; repressed inflation; currency demand; Demand for money; Inflation; Currencies; Monetary aggregates; Personal income (search for similar items in EconPapers)
Pages: 28
Date: 1990-01-01
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Citations: View citations in EconPapers (3)

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