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A Study on the Factors Influencing Household Consumption from a Money Demand Perspective: Evidence from Chinese Urban Residents

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  • Yanqin Zhang

    (School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China)

  • Xueli Zhang

    (School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China)

  • Manzhi Liu

    (School of Economics and Management, China University of Mining and Technology, Xuzhou 221116, China)

Abstract

Based on the classic Keynesian theory of money demand and city panel data, in this study, we investigate the impacts of different money demand motives on urban household consumption in China, and provide ideas for promoting sustainable growth in household consumption in China. The results of this study show the following: First, in general, the theory of money demand motivation can adequately explain household consumption in large and medium-sized cities in China. Second, the CPI time series has a significant adverse effect on the real money demand of most households. Third, residents significantly reduce food consumption to satisfy speculative money demand for financial instruments, and the lower the income level, the keener households are to invest in high-risk stocks. Fourth, even for high-income households, the precautionary money demand generated via the purchase of commercial insurance still has a significant crowding-out effect on their total consumption. Social security spending, which reduces the precautionary money demand of households, has a much more positive impact on high-income households.

Suggested Citation

  • Yanqin Zhang & Xueli Zhang & Manzhi Liu, 2023. "A Study on the Factors Influencing Household Consumption from a Money Demand Perspective: Evidence from Chinese Urban Residents," Sustainability, MDPI, vol. 16(1), pages 1-18, December.
    • Handle: RePEc:gam:jsusta:v:16:y:2023:i:1:p:322-:d:1310024
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    References listed on IDEAS

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