The Empirical Analysis Of The Relationship Between To Liquidity In Real Economy, In Fictitious Economy And Inflation

Currency liquidity shortage or surplus will impede the normal operation of the economy, disrupting financial markets and stable price level. In this international financial crisis China takes the lead in improving the economic situation, GDP growth in 2010 is 10.3%at the basis of 9.1%GDP growth in 2009.However, inflationary pressure is followed, the current price increase reflects the excess liquidity caused by the moderately easy monetary police. Therefore, study of the relationship between inflation and excess liquidity is very important. This will not only give the basis for the management of the central bank's money supply, but also could become a theory support of the monetary policy.There are five chapters of this paper.The first chapter provides the background of this paper, introduces the main purpose of this paper is to test the relationship between liquidity and inflation. Then review of the existing research, clarifying the research ideas. At last, point out the advantages and disadvantages of this paper.In the second chapter we define the related concepts, paving the way for the following empirical study.In the third chapter we firstly introduce the measurements of liquidity and inflation. Then we take Marshall K value and M2 as the metrics of liquidity, empirical testing the relationship between liquidity and inflation. We get that liquidity is the Granger reason of inflation.The fourth chapter is empirical study of the relationship between the liquidity in real economy and inflation, fictitious economy and inflation. Firstly give the overview of the fictitious economy development. Then we divide the liquidity into liquidity in real economy and liquidity in fictitious economy, separately explore their relationship with inflation. According to the empirical results, the liquidity in the real economy and fictitious economy will lead to inflation, but the mechanism is different. The excess liquidity in real economy will result in the increase of CPI index, but there is time lag. The excess liquidity in fictitious economy will firstly lead to the asset price's increase, and then transfer to the general price level through the wealth effect. According to the empirical results, in the fifth chapter we give some policy recommendations.The paper's innovation is:(1) divide the liquidity into the liquidity in the real economy and the liquidity in the fictitious economy, estimate the liquidity in real economy and fictitious economy through measuring the velocity of money in the two economic system, empirical test their relationship with inflation;(2)take asset price into consideration. But the paper still has lots of disadvantages; the author wants more study and help to perfect the analysis.