A Study Of The Influence On Chinese Money Supply To Price In The Process Of Production And Consumption

Monetary policy usually focuses on fluctuation of price, price stability would be the target of countries’monetary policy. Monetary policy impacts two types of financial indicators:interest rates and money supply, all the changes of financial indicators impact market macroeconomic indicators. Due to insufficient degree of China’s market-oriented interest rate, the interest rate channel regulation in the process of monetary policy effect is not obvious, the money supply has become the main tool of monetary policy in China, the country adjust the money supply on all levels to deal with the social prices changes.Chinese government launched a4-trillion-Yuan plan to stimulate Chinese economy after the financial crisis. The increase of credit and acceleration of money supply is much faster than ever before. Because of the expansionary policy, inflation takes place in most of social product. During this period, price of some commodity prices vary much more drastically than social average level. This article will focuses on this unusual fluctuation of price and study the different effects of money supply on each steps of economy by empirical research.This article will explore the leverage effect of the money supply on commodity prices influence and some suggestions. Because of different pricing mechanism, the speed and degree of price change induced by change of money supply is different. This article chooses price index in different stage of production to estimate the leverage effect of money supply in empirical research. Change of money supply will cause universal change of price, and will relocate social resource, change the industry structure, redistribute residents’income by change the relative price of commodity. Above all, average effect of money supply is meaningful to monetary policy, especially for the policy which only control the total supply. We should not only concentrate on single price index when we disclose social price fluctuation, but also variety of indexes which can cover all the society. Based on this, some suggestions are put forward:Adhere to the price stability as the goal of monetary policy, Improve the price control mechanism of the monetary policy decision-making, Promote market-oriented commodity price formation mechanism.