Demand for money in transition : evidence from China's disinflation
Mehrotra, Aaron (10.10.2006)
Numero
10/2006Julkaisija
Bank of Finland
2006
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:bof-201408071965Tiivistelmä
We examine money demand in the Chinese economy during a period characterized by significant disinflation and outright deflation, coupled with strong output growth.Our study establishes a stable money demand system for broad money M2.Inflation affects the adjustment of the system towards equilibrium, and shocks to broad money are found to lead to higher inflation in the context of an impulse response analysis.The results provide support for the PBoC's policy of specifying intermediate targets for money growth. Importantly, our results suggest that movements in the nominal effective exchange rate should be taken into account in a successful implementation of such a policy. Keywords: Money demand; Deflation; China JEL Classification: E31, E41
Julkaisuhuomautus
Published in International Advances in Economic Research, vol. 14(1), 2008, pages 36-47