An Empirical Research On Relationship Between Money Supply And Macro-economy In Our Country

This article is to analyze the relationship between money supply and economic fluctuating by empirical research, including its intrinsic transmission mechanism. The sustainative economic growth calls for more money supply from the open and reform policy, but in the long run it will cause economic inflation if money supply grows more rapidly. So the variation of money supply should keep the same pace with economic cycle fluctuation, the monetary policy in central bank will make important influence on economic growth cycle and inflation by the adjustment of money supply, so does the monetary policy in our country. In the upward of economic cycle, money supply will be increased through the extended monetary policy, which will also bring more pressure of inflation; There is the contrary explanation in the downward of economic cycle, which makes economic growth slowly. At that time if we cannot hold and control the proper scale of the amount of money supply, which will lead to the serious inflation and economic declination. Although the monetary policy cannot promote economic development, yet our government can stabilize the price of commodity, or encourage more saving by the high interest rate and make saving turn into investment to control the consumption scale, all these can make economic resource allocate more reasonable. During the period of economic reform in our country the growth of money supply is much higher than the sum of GDP growth and inflation rate growth continuously, the part that money supply exceeds real GDP mainly has resulted in inflation and the bubble expansion of the asset price .The problem of money is a core issue which is the debating focus in academic finance field. The authority will have different suggestions of monetary policies by understanding this problem differently; this article will explore the influence that money supply has on economic growth, and further study the transmission mechanism of monetary policies. In fact the exchange rate of RMB also devalues relatively because of the devaluations of US dollars in the international finance market for our country has carried out the fixed exchange rate policy to the US dollars actually. There is muchstronger pressure of calling for revaluations of RMB, what is more, so much speculation capital poured into the capital market in our country by certain means, which can lead to more and more basic money supply and the excessive and exorbitant RMB by occupation of foreign exchange. All that situations will not be beneficial to nowadays macroeconomic adjustment and also bring so many troubles and challenges to the management and enforcement of foreign exchange rate policy.Now china's economy have come into s new round growth cycle and faced with the speed trend of urbanization and industrialization, so we must require the comparative growth of money supply. But there are more overheated fixed asset investments in 2004, and more reserve of foreign exchange which cause more money circulation and vary the complex structure of money supply. We reiterated that greater exchange rate flexibility remains in china's best interest, as it will improve the effectiveness of monetary policy in containing domestic demand and price pressure, and enhance the economy's ability to adjust to shocks. Greater exchange rate flexibility should also be helpful in contributing to an orderly resolution of global imbalances. So our country have made economic growth of last year realize the soft-landing by related macro-adjustments supervision and control of intermediate goal—money supply and restrained credit lines.