Currency Supply And Demand In The Environment Of Financial Innovation Research

Financial innovation means the new objects brought or created by the recombination or innovative reform of various factors in the financial field. From 90th of the last century, financial innovation has been broadly spread and applied. Not only does it change the traditional financial practices and operating methods, but it also makes creative reform to the supply of financial product and organizational structure.Under the environment of financial innovation, the behavior of habitants, enterprises, and financial institutions such as money holding, asset choosing, making financial decision and paying has changed greatly, which influences the money demand and supply to a great extent, and changes the money demand and supply mechanism deeply. Financial innovation will destroy the stability of money demand, expand the endogeneity of money supply, weaken the controllability of money supply. And at the same time, it will make money multiplier and money velocity unstable and unpredictable. Ultimately, the influence will be channeled to challenge the traditional monetary policy and hamper the realization of macroeconomic goal.The research centers around the fluctuation and changes of money demand and supply under the influence of financial innovation. Taking the behavior of the enterprises, financial institutions and inhabitants as the point to start research, the paper analyzes the topic on the microeconomic level partly, and then reveals the changes and causes of changes of money demand and supply under financial innovation theoretically and empirically. Applying cointegration test and ECM to estimate Chinese money demand functions, the research analyses the trend of changes of Chinese money demand function through stage comparison. What's more, in order to explore the influence of financial innovation on money supply, the paper uses econometric method such as Granger Causation Test, Stability Test and Residue Analysis to research on the controllability of base money, the stability of money multiplier andthe changes of affecting factors to money multiplier. Also through stage comparison, it sums up the overall changing situation of base money and money multiplier.