The Empirical Analysis of the Stability of Demand for Money in China——Cointegrated Examination Based on 1994-2005

This paper analyzes the demand for money and the missing money during transition period in China since 1994 using co-integration analysis and vector error correction model approach,which explicitly accounts for money demand function.The empirical test reveals that demand for money,income,interest rates are cointegrated.The results show that the demand for money from income is more elastic than that from interest rates.Evidence is found of stability of money demand function in short run that is not satisfied.It is difficult for PBC forecasting and using money supply as media target to control macroeconomic wave in China.Results are also found of price stability that is supreme final goal than the output growth,which is difference from former goals of monetary policy in China.