Abstract
This paper examines the influence of the stock market development on money demand in China during the period 1994Q1–2007Q2. A long-run cointegration relationship is found between the real money demand, stock market capitalization, real GDP, real interest rate and the CPI. Specifically, we show that the development of the stock market has a positive impact on money demand in the long run. In the short run, however, a boom in the stock market will lower money demand. Our work can be considered as a complement to Baharumshah, Mohd, and Yol (2009).
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