Empirical Analysis on RMB-ization of HongKong Affecting Chinese Demand for Money

摘要

In recent years, along with the advancement of opening to outside of China and the enhancement of RMB international position, the phenomenon of RMB-ization that RMB substitutes for HKD is increasingly serious. As a result, the demand for money balance of inland is interfered more and more. This paper constructs a simple framework based on the traditional model of demand for money, which adds foreign economic variables as the factor of currency substitution, and tests it by relative data between inland and HongKong. The empirical evidence supports the view that RMB-ization does have a significant effect on the demand for money balance of inland and affects the validity of domestic monetary policy to a certain extent.