| In Western developed countries, a stable money demand function is an important aspect of macroeconomic theory and practice, because it provides a reliable and predictable link among the monetary gross and related variables, which is the theoretical basis that used to determine the economic activity for the goal of monetary growth. Thus, we can say that the stable monetary demand function is also an important guarantee of the successful implementation of macroeconomic policies.In this paper, the factors that impact our national monetary demand function are the main research objects. According the Western theory of monetary demand, we do the empirical research on the relationship of real economy, price levels, interest rates, monetary indicators and money demand, and also test the impact of Chinese money demand function of the relevant factors by using econometric methods. Later, we attain a relative monetary demand and learning mode through support vector machine methodology, which can not only show the situation of Chinese monetary demand better, but also can predict it, so as to provide a theoretical reference for Chinese monetary policy decision makers.The paper mainly uses the Unstructured Vector Autoregressive Models (VAR) and Support Vector Machine (SVM) to test and predict these relations respectively. The specific structure of article as follows.The first chapter is devoted to the related research of domestic and foreign monetary demand. Because of the importance of monetary demand, in the past few decades, a series of empirical studies of money demand in the worldwide have been launched. Foreign scholars have already begun the empirical research of monetary demand as early as the sixties of last century. In China, due to the planned economic system, we has been neglected the study of monetary policy. Until the last few years, the number of researches on the monetary demand is growing. This chapter introduces the contents of the two parts, one is the points of view held by various schools of thought in foreign country which are about the research of scale variables, the opportunity cost of variable and system factors. The other is the research process of monetary demand, that is, China enjoyed a high centralized planned economic system before the economic reform. Therefore, the studies of monetary demand still stay in the circulation laws of Marxism, and to decide the monetary supplement was according to the established proportion of the total amount of money and goods. The control to the monetary supplement was out-of–control every year because of the money supply deviation making by the Chinese government and monetary authorities. The main reason for such phenomenon is that the monetary supply is seen as entirely exogenous, that means as long as the monetary supply could be adapt to the required monetary demand. However, with the reform of the development, the endogenesis of monetary demand is growing, so that it could affect the monetary supply to a certain extent, which caused the attention of China's monetary authorities and the academic.The second chapter briefly introduced the basic theory of monetary demand and the analysis by using the model. For a long time, the Western Economics research of the monetary demand focused on macro-level, and mainly discussed the stability of monetary demand, testability and other issues, and the different roles of the scale variables, the opportunity cost variables'effect to the monetary demand. In research methods, the Western scholars briefly study the decided relationship between the total monetary demand and national income, as well as the national wealth and interest rate and so on. They use the statistical data to empirically estimate the monetary demand function based on the theoretic models. And then they make a simple summarize of Western theory of monetary demand and the analysis by using models, including the classical theory of money demand, the number of cash transactions and cash balance of the number that said that Keynes's Liquidity Preference Theory and Baumol - Tobin model and the Tobin Mean-variance model, the number of Friedman's monetary theory and the theory of wealth as well as micro aspects of the adjustment of the overlapping generations model (OLG model) , the utility function of the monetary model (MIU model) and model cash-in-advance constraint (CIA model) . Based on the previous two chapters, Chapter Three gives the monetary demand function form which is adapt to our nation, according to the macroeconomic and our specific circumstances of monetary demand. According to the theory of monetary demand, there are mainly three types of variables which are generally believed to factors that affect the monetary demand: the scale variables, the opportunity cost variables as well as institutional factors, including other variables. Based on the comparison among the monetary demand models which contain a variety of variables, this paper use the actual GDP as the scale variable; using the inflation rate and inter bank interest rates as a proxy the opportunity cost variables. Variables of monetary demand of China were M1 and M2, using the actual values.In the fourth chapter, first of all, we use the ADF to test the unit root for the time series. Using the AIC to determine the lag order K of this model, the smaller value of AIC indicate the better lag order. Through this testing, we can see the level series of these variables as LGDP_sa, inflation, r, v and LM1, LM2 are instability, however, the one-order difference sequences, as DLGDP_sa, Dinflation, Dr, Dv and DLM1, DLM2, are refusal to containing unit root assumption, therefore, they are the typical I(1) (unit root process) time series. Second, we make VAR analysis to the systems of LGDP_sa, inflation, r, v and LM1, LM2 respectively using EVIEWS. The results showed that the model is stable because that every root fall into the unit circle. Through a series of tests, we can show using lagged 4 is the best because the AIC and SC both achieve the minimum; the money demand (LM1) with the lagged real economy (LGDP_sa) values has a positive correlation, and with the lagged monetary indicators (Lv2) and lagged interest rate (r) values has a negative correlation. Third, by using the impulse response function, we can calculate the impact on LM1 of every unit impulse of LGDP_sa, Lv2, r and inflation respectively. Finally, we can draw the following conclusions by use of variance decomposition: For the variance decomposition of monetary demand (LM1) , in the second phase, the impact of LM1 from the equation accounted for about 99.28148%, and the impact of LM1 from the equation accounted for about 0.486004 percent, and while those from r and the impact of inflation is very weak. The impact of LM1 has weakened in the later, but still more than 79 percent. The impact of LGDP_sa is increasing and it reach to 14.96141% in the 12 phase. This shows that the fluctuations of LM1 are basically from their own, which the real GDP may have a greater impact on. In addition, interest rates also have a certain influence, and gradually increased. The rate of inflation has little effect.In addition, this paper also uses support vector machine method to establish a monetary demand function for predict. The process is as follows: according to SVM theory and the experiential value of monetary demand function, after repeated testings, we can determine the parameters of the training are as follows: a linear kernel u'v and C = 0.5 and loss function value of 0.0001 solution of SVM regression. The results show that this SVM model could provide more effective support to the monetary policy in the future.Finally, the paper summarizes empirical results, and gives a reasonable explanation for the characteristics of Chinese monetary demand function, and attains the prediction model according to SVM. |
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