Expected inflation rate impacts China's money demand, influencing monetary policy.
The study analyzed factors influencing China's broad money demand from 1996 to 2009. It found that people tend to hold more money when their income increases, but less money when interest rates go up. Expected inflation also plays a significant role, with higher inflation leading to lower demand for money. The research suggests that by understanding these relationships, policymakers can better control the money supply, improve the money demand system, and stabilize prices.