Study On The Inflation Based On Currency Visual Angle

Inflation is one of outstanding problem in present macro- economy. Prices had not risen at this speed in several years. Under consumer price inflation at 4.8 percent background in 2007, this January CPI is even at 7.1 percent .In February, effected by snow disaster and Spring Festival ,CPI is at 8.7 percent .This data have not appeared in these twelve years .So entire society especially the government pays close attention to prices .Central authority is brought that our the most important task in macro-control is preventing China's economy overheating and prices going up from structure into obvious inflation .In order to tighten of credit ,control prices and maintain sustainable economic growth ,the People's Bank have to practice tight monetary policy such as increasing statutory rate of deposit reserved and rate of deposit and loan .There are kinds of causes that may make prices rise .But owing to the currency viewpoint ,the inflation point to one consequences when currency supply is more than needed currency in the economy .This paper primarily analysis the relationship among the growth of output , price and monetary aggregates based on the currency visual angle so that we know how to improve the efficiency of monetary policy and adjust monetary transmission mechanism with inflation as macro-economy background .In this way ,monetary policy can become more effective in making economy stably and healthy and avoiding inflation that will bring to negative effect on healthy development of national economy.At first, this paper recollects theory research and home and abroad document about relationship among the growth of output, price and monetary aggregates .Then building up a logic relational expression using the growth of output, price and monetary aggregates. Through this logic relational expression, we build up a VAR model to analyze the state of China, Japan and India respectively because there are diversity influence with different monetary policy under different background. Through comparative study on China, Japan and India, we can find out what contribute to these difference so that we can employ much better monetary policy and monetary transmission mechanism to promote to development of China's economy .Furthermore, analyzing what we should pay attention to when the monetary velocity has changed . Thus, we provide some monetary policy advices.