A Study On Monetary Multiplier And Individual Behavior

1 The reason of choosing the topic Economic globalization is an inevitable trend of world economy. After China' entry into WTO, its economy is gradually the important part of this trend. When considering the risk and benefit, the person's actions such as money holding, capital choosing, investing and financing have changed a lot, which affect personal money holding amount. All of these will change the rate of circulating medium. As the development of information technology, electronic currency will be the main payment way for people in the future. And this would influence the rate of circulating medium greatly. And the monetary multiplier is impacted by rate of circulating medium, which finally takes some vital effects on the supply of currency. As all above-mentioned we can know, all these changes will largely work on the system of the monetary supply in our country. The changes happened in system of monetary supply will do a lot to our national economy such as validity of monetary policy and realization of macro-economic modulation. So analyzing deeply the micro-base of monetary supply would be very significant in theory and practice, especially in improving the monetary policy of our country. All the analyses mentioned above will serve the model building of monetary supply micro-base. According to these analyzing on the economics, an important conclusion will be made, which concerns the momentous effects that personal actions do on the monetary supply. 2 Theory foundation Domestic and overseas researches on monetary-supply mechanism mainly concentrated on the endogenesis and exogenesis of monetary supply, as well as the validity of monetary policy. The mainstream economics such as Keynesianism, Monetraism, and Rational expectations theory deem that monetary supply is an exogenous variable in terms of endogenesis and exogenesis of monetary supply. The monetary authorities can influence the economy development by means of determining and controlling monetary supply. On the contrary, the new Keynesianism emphasizes on the endogenesis of monetary supply. For instance, Tobin insists that Friedman's explanation on monetary supply equation is not convincing. He thinks that monetary supply is endogenous, for economy situation determines monetary supply, not verse vice. Domestic researches on monetary supply began in 1960s, when there were no conceptions such as base money and monetary multiplier. As the result, their researches are only limited to Marxism monetary formula, and most of which are applicable researches with characteristic of policies choices and operations. Since late 1980s, domestic researches began to focus on researches on monetary demand and supply according to the changes of these variables, together with the establishment of China's central banking system and reserve system. Meanwhile, researches during this period mainly focused on the explanations and comparisons of western monetary demand and supply, so there are few impressive theories and views at that time. Generally speaking, domestic researches on monetary-supply mechanism are mainly qualitative analysis and the micro-angle analyses are less, not to mention positive or econometric researches. 3 Basic content This paper studies the ratio of currency, an important factor influencing monetary multiply. On the basis of China's situation and relevant study achievements both abroad and domestic, I make ration analyses on the influence of ration of currency on monetary multiply and raised some pertinent policies viewpoint in line with our situation. It not only provides useful supplement for our monetary supply and demand theories, but also attestation to adjustment and improvement of monetary policies. The main construction is as follows: First, it discusses the influence of microeconomic individual actions on the monetary multiply, and further the monetary supply quantity, which serves the complete theory model of monetary supply. Thus the second chapter mainly discusses one factor influencing monetary multiply by non bank...