Empirical Analysis On The Impact Of Electronic Money Upon China’s Monetary Multiplier

The development of electronic money not only speeds up thetransaction period, optimizes user payment experience, changes people’slife style and payment habit, but also brings new challenges and impactsto the traditional monetary financial system, especial for the impact tomoney supply.Based on the popular monetary theory, money supply is decided bytwo factors: base money and monetary multiplier. When base money isfixed, the change of monetary multiplier will impact to money supply.Generally speaking, the base money is exogenous variable which iscontrolled by central bank while it’s hard for central bank to fully controlmonetary multiplier.This thesis is divided into5chapters to do theoretical and empiricalanalysis about the impact of electronic money upon China’s monetarymultiplier:Chapter one is introduction of background and meanings of this study, which also includes the survey from both international anddomestic related studies. Chapter two summaries the definition, featuresand classification of electronic money, the development of electronicmoney at the broad and also in China which is represented by thedevelopment of bank card industries. Chapter three is the theoreticalanalysis of the impact of electronic money upon monetary multiplierthrough study of money supply, Jordan monetary multiplier model andothers factors which impact to monetary multiplier. Chapter four selectsthe data samples, chooses the model variable, summaries the change trendof China’s monetary multiplier between1993and2012, and establishesthe data model between electronic money and monetary multiplier. Theempirical analysis about the impact of electronic money upon monetarymultiplier is based on the statistical software Eviews6, using time seriesanalysis method to establish the co-integration and long term correlationbetween electronic money and monetary multiplier. Chapter5gives theconclusion of this thesis and also raises some questions for further study.Through the theoretical and empirical analysis, the conclusions ofthis study are:The electronic money which is represented by development of bankcard industries in China has long term and stable positive correlation withthe narrow multiplier and broad multiplier, the development of Chinaelectronic money amplifies the effects and enhances the endogenous mechanism of monetary multiplier. The impact upon narrow multiplier issmaller while it’s larger to broad multiplier from electronic money, whichfurther transforms China’s money fromM1toM2.