The stability of money demand in China

Evidence from the ARDL model

Ahmad Zubaidi Baharumshah, Siti Hamizah Mohd, A. Mansur M. Masih

    Research output: Contribution to journalArticle

    34 Citations (Scopus)

    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.

    Original languageEnglish
    Pages (from-to)231-244
    Number of pages14
    JournalEconomic Systems
    Volume33
    Issue number3
    DOIs
    Publication statusPublished - Sep 2009

    Fingerprint

    Money demand
    Autoregressive distributed lag model
    Inflation
    Stock prices
    China
    Long-run relationship
    Short-run
    Cointegration
    Misspecification
    Distributed lag
    Monetary aggregates
    Interest rates
    Demand function
    Real income
    Deflation
    Assets
    Wealth effect
    Bounds testing

    Keywords

    • ARDL
    • Money demand
    • Stability
    • Stock price

    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    The stability of money demand in China : Evidence from the ARDL model. / Baharumshah, Ahmad Zubaidi; Mohd, Siti Hamizah; Mansur M. Masih, A.

    In: Economic Systems, Vol. 33, No. 3, 09.2009, p. 231-244.

    Research output: Contribution to journalArticle

    Baharumshah, AZ, Mohd, SH & Mansur M. Masih, A 2009, 'The stability of money demand in China: Evidence from the ARDL model', Economic Systems, vol. 33, no. 3, pp. 231-244. https://doi.org/10.1016/j.ecosys.2009.06.001
    Baharumshah, Ahmad Zubaidi ; Mohd, Siti Hamizah ; Mansur M. Masih, A. / The stability of money demand in China : Evidence from the ARDL model. In: Economic Systems. 2009 ; Vol. 33, No. 3. pp. 231-244.
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