The Research On Money Demand In The Context Of Supply-side Structural Reform

In terms of the domestic situation,the mismatch between supply and demand in the economic structure has become prominent since 2015.Macroeconomic policy,which is based on demand management for a long time,is facing with a dilemma.Moreover,the continuing global economic recession and the sudden outbreak of COVID-19 have brought great uncertainties to China’s economic growth.In this context,China proposes the internal requirements of supply-side structural reform to balance the supply and demand structure.From the perspective of the current reform process,the reform has achieved remarkable results.However,the task of economic structure optimization and adjustment has not been completed.Further promotion of the supply-side structural reform has become the main line of economic regulation and development in China.The supply-side reform needs effective demand as the premise.Monetary demand management is closely related to monetary policy.Monetary policy directs the development of monetary demand and affects the healthy development of economy and the innovation of industrial structure.On one hand,the demand should be moderately expanded in the short term and the economy should be properly controlled;On the other hand,the supply-side reform needs a certain effective demand as the premise.Therefore,under the framework of supply-side structural reform,money demand management becomes an important issue: money demand management policies should support economic growth,take new characteristics of economic growth into consideration,and cooperate with the long-term strategic goals of supply-side structural reform.To sum up,this paper mainly studies on the factors that determine China’s macro and micro monetary demand and the ways to control these factors to improve the effect of monetary policy,combining with the changes of monetary demand management in the context of supply-side structural reform.This paper is divided into 8 chapters.From the macroscopic and microscopic perspective,this study focuses on money demand management in China,especially under the background of supply side optimization.According to the national macro monetary demand and micro enterprise money demand,different monetary demand functions are established by using empirical data for inspection and analysis.The conclusions of this research are listed as follows.1.The Perspective of Macro Money DemandFirst of all,with the change of economic conditions,it can be seen that China’s money demand function presents a dynamic optimization state,which is from "closed" to "open".According to the traditional money demand theory,the money demand function only contains the scale variable of income,domestic interest rate and price factors under the "closed" condition.The result of the money demand function model is unstable.The model setting test fails,which cannot accurately reflect the money demand in China.When taking the exchange rate and foreign exchange factors into consideration,it is found that the model of the money demand function is set correctly and the estimation result is better.However,when foreign macroeconomic factors are added,the empirical result of the money demand function in China is optimal,which is in line with the reality of China’s development.Based on the fitting results of the optimal macro money demand benchmark model,the size variable of income has a positive effect on the demand function in the long-term relationship.The influence of market interest rate factors is not significant,which may be caused by the low degree of interest rate liberalization in China and the weak substitution between money and financial assets.The relationship between domestic price factors and money demand is significantly negative.There is a significant correlation between exchange rate and currency demand.The balance of foreign exchange has a significant negative influence on money demand.Market interest rate and inflation rate,as representative foreign economic variables,have a significant negative relationship with China’s macro money demand function.Secondly,after establishing the macro money demand function in line with the reality of China’s economy,we also take the influence of financial innovation,institutional factors and stock market factors on the stability of China’s money demand function into consideration.The macro-index of financial innovation(M2/M1)has a significant positive impact on the money demand function,which is inconsistent with economic theories.However,the stability of the model is not significantly affected.In addition,institutional factors and the development of the stock market have a significant positive impact on the money demand function,which indicates the change of the financial system,the trend of the continuous development of the financial market and social and economic subjects’ demand for money increases.2.The Perspective of Micro Money DemandFirst of all,this paper adopts systematic GMM method to estimate the parameters of the benchmark model.The result shows the increase of enterprise income scale,the reduction of enterprise cost,and the improvement of enterprise wage level.All these factors will make the enterprise money demand expand.Secondly,this paper further studies the threshold effect of external institutional environment and ownership structure of enterprises on their money demand by using dynamic panel threshold model.The research is based on the micro demand benchmark model.In the context of supply-side structural reform,this paper chooses four external institutional environment variables of the regions where enterprises are located,including government efficiency,technological innovation environment,advanced industrial structure and financial development level.The ownership structure of enterprises is investigated from the perspective of state-owned holding proportion.According to the result,if the local government efficiency is in different regions,the sensitivity of enterprise money demand to currency holding cost is different,and the reduction of government efficiency will weaken the effect of government regulating enterprise money demand.When the improvement of the technological innovation environment reaches a high level,the enterprise will increase the investment in innovation activities,and the monetary demand of the enterprise increases with the positive change of the enterprise income scale.When the industrial structure of the region is located at a lower level,and the enterprise’s efficiency is low and competitiveness is weak,the enterprise’s money demand is more sensitive to the money holding cost.When the financial development reaches a high level,the difficulty of enterprise financing is reduced,and the substitution degree of commercial credit for enterprise cash holding is increased.Accordingly,the sensitivity of enterprise money demand to the money holding cost is reduced.When the proportion of state-owned holdings of enterprises reaches a high proportion range,enterprises have special financing advantages in financing costs,financing methods and financing channels.Consequently,the sensitivity of corporate money demand to currency holding cost decreases.Based on the above conclusions,combined with the background of China’s supply-side structural reform,as well as the development status of money demand and the new demands of money demand management,this paper puts forward policy suggestions on money demand management from macro and micro levels.At the macro level,the paper puts forward the measures to manage and control the macro money demand according to the influencing factors of the money demand function.At the micro level,based on the influencing factors of the micro money demand of enterprises,the management and regulation of the micro money demand of enterprises can be achieved by optimizing the external institutional environment factors of enterprises and starting from the core factors such as optimizing output,increasing income and reducing financing costs.In addition,enterprises are important targets of supply-side structural reform,and the role of finance in promoting supply-side structural reform of enterprises should be brought into play.