Explaining money demand in China during the transition from a centrally planned to a market-based monetary system
Résumé
We examine the transition process from a centrally planned to a market-based monetary system in China, with the objective of giving a functional form to the transition in money demand. Applying the cointegrating Time-Varying Smooth Transition Regression model proposed by Choi and Saikkonen (2004) on a constructed dataset spanning the period from 1984 to 2010, and using a seasonal unit-root test developed by Hylleberg et al. (1990), our findings invalidate much of the earlier literature. Our examination of disaggregate as well as aggregate money balances yields the following findings.