The Impact On Money Circulation Velocity Of Electronic Money

The emergence and development of E-money has not only changed people's payment, but also posed a great challenge to the traditional monetary and financial theory, E-money itself with high liquidity and replace of the traditional currency will have a profound impact on the money velocity. Based on this, the paper along the theory of synthesis, mechanism analysis, empirical research and counter measures ideas, used of the 1978-2006 sequential series data of China to analysis the problem of the E-money impact on the money circulation velocity. In the second chapter, we have combed the literature from three aspects: the influence factors of money circulation velocity, E-money theory and E-money impact on the money circulation velocity. Analysis shows that from the U.S. economist Irving Fisher to many scholars today, the research of the relationship between the technological advances and money circulation velocity has not stopped. In the third chapter, according to the paper, the E-money impact on money circulation velocity is inconsistent in different time, so we divided the effects into two distinct phases. Then the paper discussed the E-money impact on the social amount of money from two aspects: the money demand and money supply. Then derivation of the E-money impact on money circulation velocity in different stages. In the fourth chapter, this paper seleceted two sequential series data, and used cointegration method to established two sequential series' regression equations. Empirical analysis shows that the E-money impact on our country's money circulation velocity mainly through two factors: the cash ratio and the degree of finance innovation computerization. The E-money has two effects on the money circulation velocity: The first is the E-money substituted to the traditional currency, and elevated the level of finance innovation computerization; these will reduce the total amount of money and accelerate the money circulation velocity. The second is E-money make the high fluid monetary assets into the high rentability monetary assets. This kind of transformation increased the amount of low fluid monetary assets, while a large number of financial transactions had also increased the demand for money, these will reduce the money circulation velocity. E-money impact on money circulation velocity should compare these two effects. In the fifth chapter, based on the empirical results of Chapter four, this paper proposed the policy recommendations to improve monetary policy operations: First, our country does not have the conditions and environment to give up the money supply as the intermediate target of monetary policy. Second, it is feasible to select technology-based financial innovation such as E-money to improve the money circulation velocity in our country. This can improve the effectiveness of monetary policy.