Study On The Relationship Among Money Supply,Interest Rate And Economic Growth Based On China

Since the reform of monetary control mechanism, the money supply and interest rates as Mediator’s macro-control policy in promoting economic growth played an important role. But with the marketization accelerates, China’s economic environment has greatly changed and the relationship among economic variables is more complex. In this economic environment, clarifying how the money supply and interest rate affects economy growth plays a great role in the reasonable economy development.Faced with the above question, this paper analyzes the currency theory, interest rate theory and the theory of economic growth to clarify the mechanism of the transmission mechanism of the three. The research results show that money supply and interest rate affect the savings, consumption, investment and other elements by changing the price of asset, which optimizes the allocation of resources to promote the economic growth. The paper adopted January2007-December2014monthly data, established a time series model for the empirical analysis. Results are that there exist long-term equilibrium relationship between interest rates, money supply and economic growth, rational use of interest rates and the money supply can promote economic growth, but the effect is not obvious in the short term; interest rate can not completely rely on market-determined interest rates.Based on these results combined with China’s actual situation, we believe that China should further deepen the financial market reform and market system construction, improve the external economic environment, and warning mechanism of economic fluctuations. We should add economic volatility feedback to enhance the ability of the monetary authorities to anticipate and solve problems. We should continue to promote market-oriented interest rate reform and establish a market benchmark interest rate.