Monetary Velocity In China

Velocity of money,which is ratio of output or exchange number to money and links real economy with financial economy,has been a significant topic of money economics.The dissertation will analyze the monetary velocity during Chinese economy transition, by exerting the way of structural analysis and economitrics, through the study of transaction velocity of money,sector velocity of money and monetary policy.Firstly,this paper gives a review of the theoretical researches on monetary velocity,obtains several summarys.Transaction velocity and income velocity of money come from two distinct traditions of the quantity theory of money——the transaction approach and the cash balance approach.This paper clarifies some relevant concepts in the transition from transaction velocity to income velocity in the study of monetary velocity, laying a theoretical foundation and framework for the following chapters.Next,Chapter 3,"The Analysis of China's Transaction Velocity". Transaction velocity and income velocity of money are two important concepts in the study of monetary velocity.In recent years transaction velocity gets more concerns because of the instability of income velocity. This chapter analyzes the trend of transaction velocity of money in China based on the statistics from 1992 to 2008.We find that the transaction velocity in China fluctuates procyclically. Meanwhile, the synchronicity of the fluctuation of transaction and income velocities in china disappears after 2000. This can be attribute to the increase of intermediate goods transactions and financial assets transactions after 2000.The analysis of the transaction velocity can indicate money demand and add to our understandings of the planning of money supply targets and the implementation of monetary policy.Then, Chapter 4," The Analysis of China's Sector Velocities".This chapter presents the concept of aggregate velocity which is based on the extended identity of exchange. The changes in aggregate velocity can be discussed in two ways:the changes in the velocity of each economic sector and changes in the shares of the total money stock held by each economic sector.Based on the Flow of Funds Accounts of China,this paper analyzes the monetary velocity of nonfinancial corporate, consumer and government sectors,and also makes a analysis of the effect on aggregate velocity of weight shifts of total money held by the three sectors.The analysis of aggregate velocity divided by economic sectors can add to our understanding of the behavior of narrow velocity of circulation (GNP/M1)Finally,on the basis of the above studies, this paper explores some policy implications of the changes of China's monetary velocity and draws some following conclusions. Chapter 5 discusses monetary velocity and the intermediate target of monetary policy.Since1996, China began to use money supply as the intermediate target of monetary policy. Therefore, it has the theoretical and realistic significance to further discuss the effectiveness of the money supply as the monetary policy intermediate target.This paper first investigates the theoretical basis and the evolutionary process of money supply as the intermediate target in western countries and china, and argues that money supply still has the advantage to be the intermediate target in China,but we should consider to use loans as a intermediate variable in monetary policy.Chapter 6 discusses the structural problem of Chinese monetary policy,in the perspective of the velocity of corporate sector.In china.loan market is the main channel of the transmission of monetary policy.The main problem of the present loan market in china is the problem of loan concentration.This chapter illustrates the present situation of loan concentration and then gives an analysis of the causes, and reveals the harmful influence of loan concentration on economy and finance. Accordingly, the corresponding countermeasures to solve the loan concentration are proposed.Chapter 7 discusses the coordination of monetary policy and financial policy in China,in the perspective of the velocity of government sector. Previous studies about the coordination of monetary policy and financial policy are mainly about policy of Fiscal Investment and Loan and policy of management of national debt. Fiscal deposits as an intersection of monetary policy and financial policy is rarely referred to.This chapter discusses the affection of financial policy on monetary policy in the perspective of fiscal deposits,where the reform of Treasury Single Account is introduced to the analysis of the velocity of government sector. This chapter also analyses the causes of the sharp increase of Deposits of Government Departments & Organizations in recent years. Accordingly, the corresponding policy implications to accelerate the velocity of government sector are proposed.