Economic Globalization, China's Money Supply Empirical Research

The endogeneity of money supply is an important issue in monetary economics. It claims that the quantity of money supply is determined by economic participants for the purpose of facilitating their economic activities, while central bank cannot determine the quantity of money at all. hi China, the process of money supply characterized by the "inverted mechanism" clearly shows that money tends to be endogenously determined. Therefore, an exploration of the endogeneity of money supply is of great significance to understanding the mechanism of money supply in Chinese economy and formulating effective monetary policy.On the basis of a summary of related theories on money supply, the thesis analyzes the influences of the behavior of such micro-economic subjects as enterprise, commercial bank and inhabitant on money supply. Then an empirical analysis of money supply is made from the perspectives of the quantity of money supply, monetary base and money multiplier to demonstrate the endogeneity of money supply. Both the relation between money supply and economic indices and money liquidity are discussed and the function of money supply as intermediary goal of monetary policy is doubted. The thesis also discusses the features of monetary base, money multiplier, their influencing factors as well as their interactive relation. At last, it illustrates the impact of economic globalization on money supply and forwards some suggestions on improving our monetary policy.