The Research Of The Correlation Between Money Supply And Macro-economy Variables In China

It is the focus discussed about the relationship between the money supply and the macro-economics. On the one hand, money supply is the middle target of the monetary policy, and it determines the effect of monetary police. On the other hand, money supply is a most important variable of economic, and it is a voluntarily changed internal variable which is influenced by many factors. Appropriate money supply will stimulate consumption and drive economic increase. However, excessive or short money supply will cause the price fluctuations unusual, and influence the health of economy.Since 1993, our country started to take the money supply as the middle target of the monetary policy. The mode is turned directly to the indirectly. From 1996, central bank takes the M, as the short aim and the M2 as the long aim to control. And money supply shows more and more important role in our country's macro-economics. So money supply as our country's middle target of the monetary policy, is it have relationship with the macro-economics? Can central bank influence with the entity economic department by inflate and deflate the money supply? And how is money supply influence the macro-economics? This problem all needs to be solved.The article use theoretical analysis and demonstration research to analyze the problem. Based on the theoretical analysis of relationship between the money supply and the macro-economics, use the cointegration theory which is contrived by Granger and Engle to analyze the relationship of money supply M2 and GDP, CPI, capital account, loan and government payout by use of essentials of econometrics'software Eviews 5.0 edition, and then elicited the VECM to forecast the data, the forecast data validate the good fitting of the model. At last, make use of impulse response function theory and variance decomposition theory to explain the meaning of model, and elicit the conclusion that the money is non-neutrality and money supply is endogens in our country. Based on the research conclusion analysis and integrate the characteristics of China's economic development, the article advanced many reasonable proposals to carry out the economic aim that is based on the currency stability to accelerate the economic development.