The Research On Monetary Velocity In China

Monetary velocity is an important and complex topic in the monetary economics. According to Fisher equation of income type, monetary velocity determines money flow then income. If nominal income is constant, monetary velocity will determine money supply. The changes of monetary velocity should be considered when monetary policy is worked out. Moreover, the changes of monetary velocity itself are the results of the changes of macroeconomic and financial environments on the one hand, and also reflect many problems in the economy and finance on the other hand. Therefore, it has an important theoretical and practical significance to study China's monetary velocity systematically and thoroughly.Firstly, this paper gives a review of the theoretical and empirical researches on monetary velocity home and abroad, obtains several enlightenments, and points out some defects and problems on the researches on China's monetary velocity, laying a theoretical foundation for the following chapters.Next, this paper gives a description and demonstration of long-term trend and short-term fluctuation of China's monetary velocity. As for long-term trend, China's narrow monetary velocity and broad monetary velocity have been significantly declining over time from 1978 to 2005, and the latter declines faster than the former. Econometric test is given on China's monetary velocity with the theory of structural change for the first time. Empirical results show that data generating process of China's narrow and broad monetary velocity has no structural change, so China's monetary velocity has been keeping a stable trend of sustained decline. This paper applies some related concepts of economic cycle to study the issue of short-term fluctuation of China's monetary velocity that is ignored in the domestic economics field systematically, and obtains some length and extent characters of cyclical fluctuation as well as pro-economic-cyclical and pro-inflationary-cyclical characters on China's monetary velocity. This paper also demonstrates the determinatives of short-term fluctuation of China's monetary velocity.Then, on the basis of having made the characters of the changes of the monetary velocity clear, this paper gives explanations and econometric tests for the determinatives of China's monetary velocity in the institutional framework, in the money demand framework and in the dynamic general equilibrium framework one by one. The above contents are the core ones of the paper.