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The behaviour of the currency-deposit ratio in mainland China

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  • Mohammad Hasan

Abstract

This paper investigates the behaviour of the currency-deposit ratio in mainland China in the light of three theoretically identified factors: income growth, interest rate movements and inflationary expectations. It was found that the unprecedented decline in the currency-deposit ratio is unambiguously determined by a secular growth in income, whilst the role of interest rates and inflationary expectations is at variance across specifications and sample period. However, the observed variation of the currency-deposit ratio attributed primarily to income and secondarily to interest rates make the money multiplier endogenous.

Suggested Citation

  • Mohammad Hasan, 2001. "The behaviour of the currency-deposit ratio in mainland China," Applied Financial Economics, Taylor & Francis Journals, vol. 11(6), pages 659-668.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:6:p:659-668
    DOI: 10.1080/096031001753266948
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    References listed on IDEAS

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    1. Philip Cagan, 1965. "Determinants and Effects of Changes in the Stock of Money, 1875–1960," NBER Books, National Bureau of Economic Research, Inc, number caga65-1.
    2. Hansen, B.E., 1990. "A Powerful, Simple Test For Cointegration Using Cochrane- Orcutt," RCER Working Papers 230, University of Rochester - Center for Economic Research (RCER).
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    Cited by:

    1. Khaskheli, G H & Ahmed, Aqeel & Hyder, Kalim, 2013. "The Behavior and Determinants of the Currency Deposit Ratio in Pakistan," MPRA Paper 85502, University Library of Munich, Germany, revised Mar 2013.
    2. Mr. Robert Tchaidze & Mr. Salome Tvalodze, 2011. "Deposit Formation in Georgia," IMF Working Papers 2011/078, International Monetary Fund.

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