China's Money Supply Endogeneity Analysis

In the viewpoint of prevailing monetary economics, the theoretical basis of implementing monetary policy are theories of the non-neutrality of monetary policy and the exogeneity of money supply. But the theory of exogenous money supply can't explain the ubiquitous phenomena of endogenous money supply in the field of economy, for example, there exists evident asymmetry when combating inflation and deflation applying monetary policy. This has rendered the theory of exogenous money supply to face a severe challenge of economy reality increasingly. Just under this circumstance, the theory of endogenous money supply has began to draw more and more attention from the trade of financial theory and those who enact policies.The endogeneity of money supply is considered by post-Keynesian economists as main thesis of monetary economics. It means the quantity of money supply is not an exogenous variable decided by central bank, but determined by economic participants for the purpose of facilitating their economic activities, the theory of endogenous money supply abides by the logic relation of cause and effect of "the theory of nature determining", and has supplied money authority theoretical basis to carry out rational monetary policy according to objective economic law.The prelude explicitly differs endogenous variable from exogenous ones, from the angle of systematic theory, applying the method of econometrics. On this basis, introduces philosophic connotation of exogeneity and endogeneity of money supply.Chapter 1 firstly comments on Gurley & Shaw 's "endogenous money-exogenous money" model, Tobin's theory of endogenous money supply andpost-Keynesian "mixed portfolio----loan demand approach" model, then bringsforward a model of forming mechanism of China's endogenous money supply.Chapter 2 expounds and proves the endogeneity of China's money supply from the aspects of money base, money multiplier,and velocity of money respectively. Also analyses theoretically and empirically the phenomenon of extra money supply in China.Chapter 3 can act as the conclusion of this dissertation. It firstly expounds the developing tendency of the endogeneity of China's money supply, then draws the conclusion to implement effectively monetary regulation and control. So the dissertation has the systematization and integration of theory studying.