Research On The Regional Differences Of China’s Currency Circulation Speed

In recent years, the decreasingcurrency circulation speed has becoming a prominent problem in macro economy.The instability of money velocity function brings regulatory challenges for the monetary control.This phenomenon has gradually caused attention of decision-makers and researchers.Theoretical and empirical researchabout China’s currency circulation speed also gradually is active.A prominent feature of the Chinese economy is with huge regional differences.Intheory,economic and financial differences will influence equilibrium of currency supply and demand in different regions, making that money velocity has significant differences among regions eventually. It is a very meaningful research subject.However, the existing literature on money velocity often takes the country as a whole object,and ignores regional differences.Based on premise of regional economic and financial development heterogeneity,this paper gives a structural analysis about the time and space change characteristics of money velocity.This study explores money velocity change law at different stages and in different regions after reform and opening up.Based on judgment for long-term statistical regional monetary velocity trends,this paper deeplyanalyses relevant factors for regional monetary velocity from three aspects:money demand, money supply and monetary efficiency,with econometric methods. Breaking through the existing research,giving structural analysis from the perspective of regions,and getting more detailed conclusionswith significant policy with strict econometrics method are the main contribution of this paper.Through this study,the following conclusions are made: firstly, China is facing dual problems,money velocity with decreasingtrend on the whole country and with huge differences among regions, the smallest in the East,the largest in the Central and in the middle in the West.By calculating,money velocity in the West has a decreasing cycle,and has a longer time to convergence compared to other regions. Secondly,unbalanced situation of regional monetary supply shows that there is monetary overhang on the whole and in the East, insufficient in the Central and in the West, but weaker in the West. And there are significant differences among different provinces in theWest.Thirdly, endogenous currency distribution channels make serious regional differences inbasic currency issue.The basic currency issue imbalances coupled with the money multiplier amplification, and makes the imbalance degree of inter-regional money supply further enlarged,but the money reversal does not solve the problem.Fourthly,the money demand function in different regions has significant differences, the East,compared to the Central and West, maintains a higher growth of money demand.The changes of the opportunity cost variables do not play a theoretical regulatory role for such demand differences.Fifthly,the output impacts effect of monetary supply in the East, which is weaker than the Midwest. Output efficiency of the money supply in different regions showsa diminishing law, in turn in the Central,the West and the East.Sixthly, the contribution of money supply to output showsan increasing trend in the East, West, and Central owing to a non-equilibrium decreasing trend. And income money velocity is the highest in the East, the lowest in the West,and in the middle in the Central. Therefore, a unified monetary policy may not achieve inter-regional optimization of monetary resources configuration.