China's money demand in a cointegrating vector error correction model

This paper estimates open-economy macroeconomic models of the Chinese economy allowing for structural change caused by 1992 reforms. Unrestricted vector autoregressions, VARs, and cointegrating error correction models, VECMs, are estimated on quarterly data early reform period 1980–1992, late period, 1993–2018. Two long-run vectors identified, which can be interpreted as a long-run, money demand function IS type income equation driven export demand. The reforms involved move to more market oriented system transformation financial institutions this seems responsible in direction effect interest rates both LM relationships.