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Asymmetric effects of exchange rate changes on the demand for money in China

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  • Mohsen Bahmani-Oskooee
  • Dan Xi
  • Sahar Bahmani

Abstract

In order to account for currency substitution, the majority of recent studies relating to the specification of the demand for money include the exchange rate as another determinant of the demand for money. However, those who have estimated the demand for money in China have been unable to find any significant effects of exchange rate changes on the demand for money by the Chinese. We show that this is due to the assumption that exchange rate changes have symmetric effects. Once depreciations are separated from appreciations of the yuan, those exchange rate changes are shown to have significant effects on the demand for money in China, but in an asymmetric manner.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Dan Xi & Sahar Bahmani, 2016. "Asymmetric effects of exchange rate changes on the demand for money in China," Applied Economics Letters, Taylor & Francis Journals, vol. 23(15), pages 1104-1109, October.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:15:p:1104-1109
    DOI: 10.1080/13504851.2015.1137540
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    4. Mohsen Bahmani-Oskooee & Dan Xi & Sahar Bahmani, 2019. "More evidence on the asymmetric effects of exchange rate changes on the demand for money: evidence from Asian," Applied Economics Letters, Taylor & Francis Journals, vol. 26(6), pages 485-495, March.
    5. Samreth, Sovannroeun & Sok, Pagna, 2018. "Revisiting the Impacts of Exchange Rate Movement on the Dollarization Process in Cambodia," MPRA Paper 91240, University Library of Munich, Germany.
    6. Md. Qamruzzaman (a) and Wei Jianguo (b), 2020. "Nexus between Remittance and Household Consumption: Fresh Evidence from Symmetric or Asymmetric Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 45(3), pages 1-27, September.
    7. Haider Mahmood & Tarek Tawfik Yousef Alkhateeb, 2018. "Asymmetrical effects of real exchange rate on the money demand in Saudi Arabia: A non-linear ARDL approach," PLOS ONE, Public Library of Science, vol. 13(11), pages 1-12, November.

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