Research On Multi-sector Currency Flows Usingthe Input-output Model

Monetary policy plays a vital role in the country’s macroeconomic, the main duties ofthe central bank is using different monetary policy, regulating the money supply.Deposit reserve ratio, open market operations and rediscount policy are three majormethods of central bank to adjust the money supply. But in recent years, instability inglobal financial markets brings the macro-control great difficulty. The efficacy ofmonetary policy used by the central bank has been weakened; this situation makes usrethink the effectiveness of monetary policy. From the point of view of monetaryliquidity among the different sectors, this thesis uses the input-output analysis method toexpand a deep study on this topic. Based on the characteristics of monetary balance ofpayments, we divided the micro-main into eight sectors: the household sector, the finalproduct manufacturing companies, raw materials and intermediate productsmanufacturing companies, commercial enterprises, non-bank financial institutions,government, the central bank and commercial bank.Firstly, based on the assumption of fixed ratio of currency outflow, we created thehorizontal input-output monetary flow model among multi-sectors and also verticalinput-output model. We solved the input-output equation group of monetary flowamong eight sectors based on horizontal balance, and the input-output equation groupand eight-sector money flow based on vertical balance. And found that all elements ofthe complete inflow coefficient matrix A are positive, the sum of elements from everycolumn is less than1. Which prove the existence of the inverse matrix (I-A); we didsome quantitative calculation to show the influence to direct inflow coefficient bycomplete inflow coefficient. Based on this analysis, a more complete and more rationalhybrid input-output model has been proposed. According to10years monetary flowdata, we did un empirical analysis for the rationality of the hybrid input-output model ofmonetary flow. The t-test assumption from Eviews showed that money flow data arereasonable, which can determine correspondance of monetary flow between differentsectors. Then we explained the suitabilities of the single input-output model and thehybrid input-output model. At last, we build some real coefficient matrix, and got twocoefficient matrix with inverse coefficient matrix. These two coefficient matrix arerespectively, the coefficients of variation between two sectors caused by changes ofbank deposits and the coefficients of variation between two sectors caused by changesof bank loans. The use of these two coefficient matrix can bring more intuitionisticanalysis the effect by changes of bank deposits and loans to monetary flows amongdifferent sectors. A special analysis for the household sector and raw materials andintermediate products manufacturing companies, which sector are most or least affectby deposits and loans and the raison. Monetary flow changes of other departments could be soved by the same method. This method can provide the reference for the centralbank in making different monetary policy.