Abstract This paper examines the cash leaking of Chinese monetary policy. We establish the empirical model based on a structure break model and asset demand theory. Results show that after 1978 the path of cash leaking change is non-monotonous. Because of inflation, the rate of cash leaking increased from 1978 to 1991. After 1992, the rate of cash leaking decreased due to economic growth and financial development. Along with the inflation expectation and real estate adjustment, the rate of cash leaking may increase in the future. So we suggest that we must consider the micro economic behavior when we carry out the monetary policy and establish more investment channels.
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Received: 17 January 2011
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Corresponding Authors:
Huan PENG
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