Study Of The Relationship Between Money Supply And Economic Growth And Price Levels

Monetary policy refers to a country's central bank to achieve its particular objectives of the economy have taken a variety of regulation and control of money supply and total credit.The implementation of monetary policy will have a direct impact on a country's economy can run smoothly.China's macroeconomic regulation of monetary policy pattern have been profound changed since 1993.Starts to pay attention to take money supply as an intermediate objective of monetary policy,at the same time gradually increased the financial reform,from direct regulation to indirect regulation.Whether or not the money supply as an intermediate objective of monetary policy appropriately,the key is whether the changes in the money supply will affect the economic growth and price stability,and so these variables.Under the above background,China's monetary transmission mechanism has become a most significant problem in theory and decision-making departments concern.This article first briefly introduces Classical theory about the relationship among economic growth,money supply and price,which is the base of the quantitative relationship Analysis.The article then review the operation of monetary policy in the recent years and analysis the effectiveness of monetary qualitatively,this conclusion is dependent on statistical data.This article uses the econometrics method from long and short-term to carry on the positive research on the relationship among economic growth,money supply and price.The results show that:(1) There are cointegration relationship between economic growth,money supply and price,the money supply is the Granger cause of economic growth,and money supply is the Granger cause of price,China's money supply does not have the characteristics of the money neutral,Indicated that at present is appropriate for M2 as monetary policy intermediate target.(2) From the Ganger test,we can conclude that economic growth will promote the increase of money supply to a certain extent,interaction and strengthen each other, and this also shows that there is a degree of endogenous in China's money supply,endogenous money supply weaken macroeconomic regulation.(3) In the long-term,the growth of money supply mainly has the influence on the price level,and eventually lead to price increases.So the national monetary policy mainly to maintain the price stability,and base on this promotes economic growth.On the base of empirical analysis,the article draws conclusions from quantitative Analysis that China's money supply is endogenous to a certain extent,the ability of monetary policy to regulate the economy is being weak.The article finally propose the countermeasure of monetary policy transmission.