Currency Variation And Financial Crisis

There are many scholars at home and abroad who keep on the study of the root causesof the financial crisis which erupted in2008. But comparing with the previous studies, thereare some shortcomings: Firstly, the understanding of the conception of “currency variation”is vague. Secondly, the relationship between currency variation and the financial crisis hasbeen neglected, as so as the evolution mechanism. Thirdly, there are nearly no study on thereasonable method how to figure the degree of currency variation in China.Based on these reasons, this paper has been focus on such works as follow: on one hand,in order to give an unambiguous comprehensive notion of currency variation, this paperdefines the exchanging medium nature of the money. On the other hand, this paper refers tothe performances、causes、results of it. There are three performances: a government tool forwealth creation, a good to be exchanged and a speculative instrument. Each performanceowns specific reasons. Currency enlarged and currency missing are the results.Secondly, there are six stages between currency variation and financial crisis, which arecurrency variation—the surge increase of the real estate prices—the speculation appearing—currency enlarged and bubble in real estate market—currency missing and the sort of thecurrency liquidity—financial crisis.Thirdly, based on the money demand function and the monetary variation index model,this paper calculates the degree of the currency variation in China inventively. It finds thatthere exits greater degree currency variation during1988to1994, but it drops greatlyfrom1995to2000. The reason is People’s Bank of China shall not exceed currency tocompensate for the government’s deficit since1994. Then been bond to the exchange ratesystem, the government issues of currency passively, the degree has been increased since2001.