Effect Of Electronic Money On Inflation

With the rapid development of network information technology and computer technology, the form of currency has changed, electronic money is one of them. Compared with the traditional currency, such as precious metals,bank notes and paper money, electronic money is a kind of virtual currency, because its existence and use depend on some carriers.Electronic money has some advantages, such as payment convenient, low cost, no time and space constraints and strong liquidity, etc., so it is used more and more frequently in the economic activities.In fact, compared with the traditional currency,the use of the electronic currency is wider in some economically developed countries or areas.As a new form of currency, the electronic currency has a significant impact on the transaction way of micro subjects,the financial system and macro economy,through the influence on currency supply and demand and money velocity, in turn, affects our country inflation.Based on the theoretical analysis,we can know that the emergence and development of electronic currency not only affects the composition of the money supply, but also will increase the money supply of the stock, on the contrary, it will reduce the demand for money and money velocity. Therefore, this article selected quarterly data from2006to the second quarter of2014to establish a linear regression analysis of the impact of electronic money on inflation, with inflation as the dependent variable, electronic money, the velocity of money and the lag of inflation independent variable.The empirical results show that the electronic money, money velocity, and the lag of inflation have a significant positive effect on China’s inflation, at the same time,under the influence of electronic money, money velocity presents a downward trend.So, from the perspective of the velocity of money, electronic currency makes money velocity decreased at the same time also correspondingly reduced inflation.Therefore, the impact of electronic currency on inflation is a two-way street,which has both positive effect and negative effect, but its positive effect is greater than negative effect. Generally speaking, the emergence and development of electronic money will lead to the rise in the price level.According to above analysis, this paper puts forward the corresponding policy recommendations, the most main is to improve the statistics of electronic currency and develop criteria to measure the electronic money,which can be used to more accurately measure the effect of electronic money to various economic variables.Under the condition of electrorfnic money, electronic money has become an important factor in the impact of inflation, so the central bank or the government should take it into account when they develop measures to curb inflation.