Money and the Consumption Goods Market in China

Abstract

This paper studies the relations between money and other macroeconomic variables as well as excess demand in the consumption goods market in the case of China, 1954–1983. We explicitly recognize the endogeneity of money in the CPE and do not impose (but instead test) some common restrictive assumptions; we assess the extent of aggregate excess demand (supply) in a macroeconomic disequilibrium model; and we allow at the macro level for the possible coexistence of micro markets in different states of excess demand or supply (shortages or slacks). We find bidirectional causality between money and income; that M0 behaves in a manner more suited to building simple, conventional models than does M2; and that there has been a mixed pattern of excess supplies and demands over the three decades. J. Comp. Econ., September 1987, 11(3), pp. 354–371. Birkbeck College, London W1P 1PA, England.