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    China's money demand in a Cointegrating Vector Error Correction Model

    Smith, Ronald and Chen, Xiaohong and Wohlfarth, Paul (2021) China's money demand in a Cointegrating Vector Error Correction Model. Journal of Asian Economics , ISSN 1049-0078. (In Press)

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    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 later 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.

    Metadata

    Item Type: Article
    Keyword(s) / Subject(s): Money demand, Cointegration, China
    School: School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Ron Smith
    Date Deposited: 03 Jun 2021 10:34
    Last Modified: 16 Jun 2021 10:05
    URI: https://eprints.bbk.ac.uk/id/eprint/44581

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