Related Theories On Currency Substitution,Its Economic Influence And The Empirical Analysis Of China

Currency Substitution means that when one country's households lose confidence in currency stability or domestic asset income rates are relatively low,large scale currency substitution takes place,which makes foreign currency replaces domestic currency completely or partly in value reservation,transaction medium,value standard and so on. Currency substitution is the inevitable problem during the developing course of developing countries,which will make exchange rate fluctuate frequently,influence the independence of monetary policy,decrease government's inflation tax and seigniorage,slack social public's confidence in domestic currency , only to the stability of macro-economy and the effective power of economic policies. The degree of currency substitution depends on factors,such as scale,exchange rate risk,the receiving benefit between foreign and domestic currency,inflation,institution,and so on. During the transition period,because of changes of institution transition,market maturing,finance economy,currency substitution phenomenon has become one of important factors influencing our macro-economy,and negatively impacting our finance system. This article makes use of econometrics to do some empirical researches on our nation's currency substitution problem,based on carefully studying western and China's related articles and papers,and gives a series of anti-currency substitution's policy advice.