An Empirical Study On The Growth Of Chinese Money Supply

To some degree, the amount of money can determine the formulation, implementation and effect of the overall economic policy and the optimization level of the economic resource. Improving the mechanism of the money supply and enhancing the management efficiency of the money supply are significant to the continued development of the financial system.This study is around the issue about the growth of money supply. Search with the domestic and abroad research on the money supply, then set forth the corresponding theoretical basis. Investigate the relationship between inflation, economic growth, interest rates and money supply. Reference to the United States, Japan and Hong Kong, we analyze the structure of Chinese money supply. We will build Vector Auto-Regressive Model with the sample data which is the data, from the first quarter of1996to the first quarter of2011, about the money supply growth rate, the growth rate of consumer price index, the real gross domestic product growth and interest rate. Use Vector Auto-Regressive Model to stimulate the money supply and do the Granger Causality Test, Impulse Response Function and Variance Decomposition. According to the results of analysis, we reached the following conclusion:firstly, Reference to the United States, Japan and Hong Kong, the structure of Chinese money supply has their own characteristics; Secondly, the fluctuations in the different levels of money supply growth will produce different economic effects; In addition, the growth of Chinese money supply also has some endogenous. The rate of inflation, economic growth and interest rates all have certain contribution to different levels of money supply.This study put forward some suggestions for monetary policy according to the research and Chinese macroeconomic situation:Advancing the marketization of interest rate for dredging the channel of interaction which happen between money supply and interest rate; Balancing inflation and economic growth, strengthen management about anticipation of money supply; Considering both the long-term and short-term when we make monetary policy, which is to promote economic development; Regulating money supply with considering the real economy and virtual economy; Perfecting capital market in order to strengthen affect from the monetary supply to investment and consumption; Grasping the point for the regulation of money supply accurately to smooth the economic cycle; Improve Chinese foreign exchange management system to enhance the independence of Chinese monetary policy.