Money and the consumption goods market in China

Money, output, price and causality in mainland China

“…First, the presence of a bi-directional causality between M 0 and real income makes the former a poor proxy as an intermediate target variable of monetary policy in China. This finding well accords with those of Chen (1989), Portes and Santorum (1987), and Li and Leung (1994). Second, the evidence of a unidirectional causality from M 3 to real income without a feedback makes the former a good intermediate target variable.…”

“…Second, the evidence of a unidirectional causality from M 3 to real income without a feedback makes the former a good intermediate target variable. The results of a one-way causality coupled with statistical exogeniety of M 3 sharply over-turns previous findings of bi-directional causality, as discussed by Chen (1989), and Portes and Santorum (1987). Third, the apparent causal independence between alternative measures of monetary aggregates and movement in the price level sharply contradicts the findings of Chow (1987), casting serious doubts about the relevance of the quantity theory of money on price level determination in China.…”

“…Studies by Chen (1989), Li and Leung (1994), Portes and Santorum (1987) find a bi-directional causality between various monetary aggregates (narrow to broad money stock defined as M 0 , M 2 , and M 3 ) and income. Most of the empirical studies using annual Chinese data performed Granger causality tests within a restrictive bivariate framework.…”

Demand for Money in Transition: Evidence from China’s Disinflation

“…A pioneering work on Chinese money demand is generally considered to be Chow (1987). As examples of other studies, Portes and Santorum (1987) estimated both real and nominal money demand systems for M0 during 1954M0 during -1983M0 during , while Girardin (1996 focused on the demand for currency during 1988-1993. Huang (1994 estimated an error correction model during the reform period of 1979-1990.…”

Stability of money demand function revisited in China

“…Chow (1987) applies the quantity theory of money to estimate a simple money demand function for China using annual data from 1952 to 1983. Portes and Santorum (1987) use real and nominal adjustment specifications and test for the homogeneity of money demand with respect to the price level and real income. Feltenstein and Farhadian (1987) estimate a money demand function based on Cagan's (1956) model, andBlejer et al (1991) apply an ECM to estimate the demand for real balances using data for only the 1980s.…”