| Since the21st century, in order to promote a significant increase in China’s economic development and people’s living standards, the Chinese government has implemented a proactive fiscal policy and prudent monetary policy. The implementation of this policy so that China’s economic development has made great achievements, people’s living standard has also been significantly improved. But at the same time, continue to develop further with the reform, the problem of excess liquidity has also been revealed. Since the "Eleventh Five-Year", the problem of excess liquidity has attracted widespread attention and government research scholars. In the government work report in2007and2008, the Chinese government attaches great importance proposed for two consecutive years and actively respond to the problem of excess liquidity that exists on our market. But the outbreak of the financial crisis in2008, making the world economy in a recession, governments in order to respond to the crisis as soon as possible and then restore the national economy, but also oh-degree unveiled a quantitative easing of monetary policy. Similarly, the outbreak of the financial crisis disrupted the rhythm of our government macro-control.2009four trillion bailout plan to launch, making China the market in the wake of the financial crisis, more affluent flooded with liquidity. Although China’s monetary authorities will next year from a moderately loose monetary policy adjustments for sound, but our market has gathered a lot of liquidity. As of March2013, the total amount of China’s M2has surpassed the100trillion mark. Reached103.6trillion yuan at the end of2013, China’s total M2reach11billion. Excess liquidity so that inflation this issue back into sight. CPI index since2003have continued to climb, scholars generally believe that our inflation and excess liquidity are related, the central bank has repeatedly recovered some liquidity by raising the deposit reserve tightening of monetary policy. But one thing we have to note that, although the continuous improvement in liquidity ample stage of the CPI index, but did not produce a vicious inflation. In the21st century, China’s virtual economy has made considerable development. Real Estate Market Investment heat rising, house prices rising all the way. Also in2006the stock market began rapid development, although in recent years, China’s stock market is not the economy, but the stock market always expanding. What kind of mechanism in the end between our excess liquidity and inflation? Virtual economic development of our country exists between what the impact of inflation? Research on these issues not only has theoretical research value, the more urgent practical significance.This study of the paper focused on the relationship of excess liquidity and inflation. Based on the background and significance of the research, this paper collate relevant research scholars at home and abroad, mainly in the relationship between the excess liquidity and inflation.Combination collating of the above, the paper define liquidity and excess liquidity, on the basis of this definition to start building the theoretical framework. In the construction of the theoretical framework, the paper mainly based on traditional monetary equation, while according to the characteristics of China’s economic development bring virtual economy into the equation so that we get the quantity of money equation that has been improved. This theoretical framework allows us to recognize the theoretical basis of excess liquidity and inflation from a theoretical point of view. Next With the help model of IS-LM model and AD-AS, the paper analysis of the mechanism of inflationary effects of excess liquidity. Then this article analysis of the performance of our excess liquidity from four aspects, the rapid rise in loan margin, prices rise in asset prices, money supply and the lower of bank interest.Based on these performance, this paper answers the causes of inflation from international incentives and domestic factors. After this paper analyzes the impact of excess liquidity and asset price inflation. base on the data between2000and2013. In the case of having a theoretical foundation, the paper began to do empirical model. First, on the basis of previous research experience about the relationship of our excess liquidity and inflation,paper selected money growth of excess liquidity as a indicators, and by building a real economy and the virtual economy VAR model to study the market contain relationship. During the time of the study, this paper studied the whole relationship in the period of the2000to2013, while a combination of excess liquidity characteristics of the entire time period, the paper divided into three smaller time periods, and make research In each small period of time. The fifth part of this paper is policy recommendations. Based on the research result, this paper gives the corresponding policy recommendations from the reasonable control of the money supply, stimulating consumption,reducing household savings, expanding investment channels to improve aspects of financial markets and accelerating the reform of China’s market exchange rate. Through research we found that there is a positive relationship between excess liquidity and inflation, that excess liquidity will bring rising inflationary pressures, which also caters the view of Friedman "Inflation is always a monetary phenomenon at any time". The development of virtual economy, can absorb parts of the liquidity, which will be able to answer "the mystery of the Chinese currency" phenomenon, namely the high rate of the money supply did not bring a vicious inflation. |
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