The Empirical Analysis of the Demand for Money in China

This paper analyzed the demand for money in China since 1998 financial crisis by co- integration test and error correction model,and it is based on the analysis of classic Keynesian Monetary Demand Theory.The results showed that the demand for money,income,lending interest rates and inflation rate are co-integrated.The demand for money from income and it from interest rate are highly elastic.There is the short run equilibrium relationship among the demand for money,interest rates and monetary policy.The result to analyze M1 showed that the elasticity of demand for money from income is higher than that from interest rates,and lending interest rate maybe regulate the money demand significantly.