| Inflation has been one of the popular topics in economics research for a long time, Stabilizing the price level became the first target of a country on choosing the monetary policy. During 2008, a world-wide financial crisis erupt, lots of countries changed their monetary policies to face the negative impact of the financial crisis. Our country had implemented the proactive fiscal policy and moderately loose monetary policy. As a result, it made a great effect on stopping the economic recession; the national economy stabilizes and recovers. However, at this stage, liquidity played a positive element; we can not help to ask some questions: whether excess money supply will affect the normal price level in the future economic life; whether it will increase inflationary pressure. This paper was written based on the thinking like these. We start the research on the conduction direction and transmission channels of monetary liquidity. Study the effect of monetary liquidity to inflation by empirical analysis with different levels and different systems. At last we hope to find some revelation on the monetary liquidity managing and the monetary policy choosing, which are useful to make the price level stable.The main research framework of this paper is as follows:The first chapter is an introduction; the main stage described the reality economic context of the world and our country, and concluded from the historical facts, pointing out that monetary liquidity and inflation certainly had correlation, than proposed the problem which will be discussed in this paper.Chapter two reviews the theory and measure of liquidity, monetary liquidity, inflation. Summing up the results discussed by some scholars and economists, through their achievements we can find out that, so far, the measure of liquidity is confined to the whole economy system; the effect from liquidity to inflation always be caused by monetary aggregates. However, in this method, the relationship which monetary liquidity affects price level can not be seen clearly. This paper considers that since the virtual economic grows and develops, find out the transmission mechanism of liquidity is important. The calculating of monetary liquidity should be treated separately on the real economy and financial market, and then study their impact on inflation.Chapter three is the first part of the empirical analysis. Generally,choose three indexes of monetary liquidity,then test the correlation between price growing and monetary liquidity changing by quantitative analysis. As a result, we can find out that it has batter explain ability on price level changing, which let the macro economy liquidity as monetary phenomenon. Or to put it another way, liquidity has two meanings, one is monetary, and the other is the ability make asset into money. So the flow direction of money is the key to discuss price changing and inflation.Chapter four is the second part of the empirical analysis. Based on the study idea of this paper, calculate the monetary liquidity of real economy and finical market with the velocity of monetary, use ADF unit root test, VEC model, Granger causality test and impulse response function in the empirical analysis. Inspect the monetary liquidity between real economy and finical market influence on the price level.The main conclusions of this dissertation are as follow:1. China's money supply and commodity price levels are correlated, and the effect can be refined into two systems: The real economy and financial market. Monetary liquidity flows in product market and financial market by different velocity. The velocity of money which flows in real economy is in smooth change, but in fictitious economy the velocity change drastically.2. The monetary liquidity of real economy has long-term positive effects on the commodity price levels, and it also has strong sustainability. As a result of the effect, the price will grow higher. However, there is a certain lag. Currency liquidity surplus in real economy will cause inflation.3. The effect of monetary liquidity of financial market to the commodity price level is more complex. In short-term, liquidity has negative effects with price; in medium, it has positive effects with price; and in long-term, the positive effects will decrease. Such a result would show that the monetary liquidity of financial market will finally reflected in the price of product market, it has latent pressure to inflation. 4. Need to implement a more rational monetary policy, the government should give close attention to both real economy and finical market, make the liquidity clear between the two systems, Strengthen the prudential supervision of monetary liquidity on transmission mechanism and pathway, to prevent abnormal condition caused inflation. When put more attention on money supply in the product market, we can not relax the management of financial markets and price level, either. |
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