A Study About The Influence Of Money Supply Upon The Fluctuation Of China’s Agricultural Price

In recent years,the sharp fluctuation of agricultural products prices has arousedwidespread concern in society. What is the relationship between current price of agriculturalproducts and the status of China’s money supply? Whether the money supply after thesub-prime crisis plays an important role?To sort out monetary circulation changes in theimpact of fluctuation in the price of agricultural products has a very important significance forthe improvement of China’s monetary policy and stable agricultural market prices.In this paper,according to the quantity theory of money,I analyzed the theoreticalrelationship between money supply and price level.According to the overshoot theory ofagricultural prices and inflation expectations theory,I analyzed the pathway of the moneysupply affect the price of agricultural products.Then combined with the current money supplyand the operation situation of China’s agricultural products price statistics analysis,as well asthe final choice of the sample data from January2009to December2012,I used cointegrationtheory,error correction model,impulse response to analyze how the money supply affectsprice of agricultural products in China. I also analyed the impact of money supply on theshort-term fluctuation and long-term trend of the price of agricultural products.At last Ianalyzed the difference that money supply caused to the different market-oriented grainproducts and vegetable basket foods.The research results show that in the long run, money supply has significantly impactedthe price of both grain and vegetable basket agricultural. Cointegration results show that a1%increase in the money supply will cause price of grain to rise about0.61%, vegetable basketfoods to rise about0.43%. Error correction model shows that the money supply in theshort-term impact on the price of vegetable basket food is greater than the impact on grainprice.It will be useful to stabilize the vegetable basket foods price through appropriate controlmoney supply.Short-term error correction coefficient is small,which means that it needs along time adjustment to completely reflect monetary circulation changes’influence on grainprice.Based on VAR model’ impulse response function diagram shows that in the face of themoney supply shocks,vegetable basket foods fluctuate dramatically,it has fast response timebut short duration than grain.