A Study On The Excess Money In China

They are many Chinese scholars who keep on the study of excess money in China since the "Chinese riddle" was mentioned by McKinnon(1993).But comparing with the foreigners' studies,there are many shortcomings:Firstly,the understanding of the conception of "excess money" is vague.Especially,some scholars are confused with "excess money" and "Liquidity Surplus".Secondly,the method how to figure the degree of excess money is unreasonable.Thirdly,in the process of seeking the reason about how to lead to the "excess money",some long-term factors have been neglected.Fourthly, there are nearly no study on the effect of excess money on the economy.Based on these,this paper had done such works as follow:firstly,in order to give an unambiguous notion of excess money,this paper distinguishes the different between "excess money" and "liquidity surplus",and then illustrates that,however,"excess money"is the money supply over the money demand which not only in real economy but also in virtual economy.Secondly,based on the sense of money equilibrium and AO-test technique,this paper recalculates the degree of excess money,and finds that there exits greater degree excess money during 1979 to 2007,but the degree has been dropped greatly since 1990s.Thirdly,based on Cointegration relationship test,Granger Causality test and impulse response function,this paper gives an empirical study on some important Hypothesis,and the empirical result shows that the reason which results in excess money is synthesis.Fourthly,this paper gives a deeper analysis about excess money and Chinese economy.Conclusion shows us there is direct relation among excess money,price and currency exchange-rate,furthermore,the relation between excess money and economic growth is disconsistent with time.