Abstract
This paper employs both the reduced-form-regression approach and the factor analysis approach to analyze the empirical definition of money in China. In the factor analysis, it is found that there are two common factors shared by the financial assets under study. One represents liquidity and the other represents store of value. The results of the factor analysis and the reduced-form-regression approach coincide and suggest that urban saving deposits are the best substitute for currency. For this reason, urban saving deposits and currency should be included in the narrow money definition, which is different from the definition set by the International Monetary Fund.
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