Research On Electronic Money And Commercial Bank Deposit Currency Creation Mechanism

The rapid development of IT and Internet has greatly boosted the electronic currency, exerting an increasingly profound influence on economy, society and our life. Electronic currency is typical of high liquidity and regarded as a replacement for cash and demand deposit, hence causing great shock to the current currency system and having a tremendous impact on all links and facets of commercial banks’money creation mechanism. A better understanding of rules regulating electronic currency and their correlation with commercial banks’credit creation bears theoretical significance for academic studies in such fields as currency and finance and important realistic implication for central bank to make and implement currency policies.Firstly, this thesis summarizes the previous studies on electronic currency and commercial bank’s deposit creation mechanism, reviews the development history of electronic currency and proceeds to provide it with a clear definition and categorization. Secondly, this thesis introduces electronic currency into the traditional model of deposit creation by commercial banks, discusses electronic currency’s influence on the behavior of such main currency bodies as central banks, commercial banks and the public. It also incorporates em, the replacement rate of electronic currency, as an independent variable into the deposit creation model, from which this thesis deduces a brand new money multiply model. Thirdly, by means of setting up an econometric model, the thesis conducts empirical analyses on the correlation between electronic currency and factors such as money multiplier, commercial banks’deposit creation ability, and monetary levels, and on the extent to which electronic currency influences such factors. Finally, on the basis of the research results, the thesis pointedly proposes policy suggestions for central banks to orderly develop electronic currency, strengthen supervision and management of electronic currency issuing bodies, define the intermediary objective of currency polices and improve the effectiveness of the policesThe research results indicate that the development of electronic currency amplifies the money multiplier effect, and that its amplification effect on m2, money multiplier in the broad sense, is greater than that on ml, money multiplier in its narrow sense. The development of electronic currency improves commercial banks’ ability to create deposit. Electronic currency boasts of two functions:one is that it can replace cash and demand deposit, and the other is that electronic currency facilitates the conversion of currency form to a high level. Currently, the conversion effect of electronic currency is greater than its replacement effect in China, and mainly represents the conversion form cash into demand deposit.