An Empirical Study Of China’s Money Demand

The theory of demand for money is not only the core of monetary economics theory but also the important component of macroeconomics theory. At the same time it is the cornerstone that monetary authorities carry out macroeconomics regulations. It is not realistic that monetary authorities select interest rate as intermediate target during China’s reform mercerization of interest rate. Therefore monetary authorities take the quantity of money supply as intermediate target in the long run. However this must take the stable money demand function as the premise. So a stable money demand function is thought to be essential for money policy, which is why I choose this topic.This paper includes five chapters:the first chapter introduces background of the study and general method used in the paper; the second chapter states development of theory of demand for money; the third chapter summarizes both oversea and domestic empirical studies on demand for money; the fourth chapter anal sizes variable’s choice in Chinese model of demand for money; and lastly one dose empirical work of the paper and summarizes the results.The conclusions of the paper include:1. The function of demand for China is M=f(GDP_SA,SV,R,INF).2. There exit co integrations between monetary aggregates(Ml,M2) and gross income, real interest rate and anticipated inflation, which mean there are stable long-term relationships among these variables. So it’s feasible for Chinese center bank to choose monetary aggregates as medium aim of monetary policy in terms of correlation between a middle aim and a final aim.3. The short-term function of demand for Ml is stable and the one of M2is instable.So we should choose Ml as a medium aim of money policy and M2as an important reference.