Publication:
The stability of money demand in China: evidence from the ARDL model
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Date
2009-09-01
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Abstract
This study examines the demand for broad money (M2) in China using the autoregressive distributed lag (ARDL) cointegration framework. The results based on the bounds testing procedure confirm that a stable, long-run relationship exists between M2 and its determinants: real income, inflation, foreign interest rates and stock prices. Importantly, our results reveal that stock prices have a significant wealth effect on long- and short-run broad money demand; its omission can lead to serious misspecifications in the money demand function (MDF). This finding is consistent with the notion that asset inflation (deflation) has systematic influence on the pattern of monetary aggregates.
Keywords
Money demand , Stability , Stock price , ARDL
Citation
Baharumshah, Ahmad Zubaidi and Mohd, Siti Hamizah and Mohammed Masih, Abul Mansur. (2009). The stability of money demand in China: evidence from the ARDL model. Economic Systems, 33, pp. 231-244.
Publisher
Elsevier