The Study Of Monetary Liquidity Of China

Recently in China, several phenomena such as the increasing of monetary liquidity,economic growth,rising of the real estate price,rapid expansion of security market and CPI stability appear simultaneously.Firstly, the paper introduces the status quo and influencing factors of monetary liquidity in China. Secondly, the paper explains the impact on the economic growth posed by monetary liquidity under the closed economy and open economy in theory and employs the co-integration test and Granger causality test to study the direct relationship between the monetary liquidity and the security market,the real estate market,the commodity market in practice. The results show that there is a positive correlation between monetary liquidity and the prices of security market (stock price index); Shanghai Composite Index will change 0.65% with 1% change of M1 in monetary liquidity; the change of monetary liquidity make a positive long term impact on the change of the home price; there is a time-lag related to monetary liquidity impacting on commodity prices, which is that the change of monetary liquidity is ahead of the change of CPI over a quarter.Chapter four recalls the"Great Depression"happened in the 20th century and the Japan's bubble economy. It is learned that the government should intervene in good time to prevent sharp decline of monetary liquidity when the bubble bursts, further to ensure the growth of the real economy. In order to maintain steady economy growth, the government should pay close attention to the change of monetary liquidity. In chapter five, the author put forward four pieces of advices on how to achieve the goal of appropriate monetary liquidity.