The Research Of Money Supply Effect

With the decline of potential economic growth rate in China, economic development will keep at high-middle speed. The progress relied on factor inputs and investment-driven in the past, whereas it is not proper for the new situation any more. It has been falling that the money supply influence the actual outputs, because the unbalance of the investment and the consumption will impede the sustainability of the economic development. Monetary policy is a gross way to regulate operation of the macro economy. The distribution of the financial resources and the needs of the economic entity mismatches. It is the key factor that contribute to efficiency loss in the process of policy implementation. The influence of the excess money supply to the real economy does not entirely concentrate on consumer market. In this paper, it will analyze the efficiency that the money supply influence on different fields, and extend the Chinese Puzzle to the relationship between currency and different fields including the corresponding market prices. By comparison the efficiency variance, I will give some suggestions to make money monetary policy more predictive.Firstly, by the international comparison, there will be an overall understanding of the efficiency that the money supply influences on the outputs. In China, takes a great proportion in demand deposits of enterprises, and takes a great proportion in time deposits of enterprises. It implies that lower efficiency of finance system and the demand of more money in the same scale economy in China. With the sluggish consumer demand, the household consumption growth is slower than economic growth in a long time. The trend of super-currency is stronger in the financial markets with indirect financing. Next, the empirical research on the influence that the total money supply acts on the investment and consumption shows that it is more efficient that the money supply boosts the investment than it boosts the consumption. The elastic coefficient of and fixed investment is 0.789320. The elastic coefficient of and the price indices of investment in fixed assets is 0.276443. In relative terms, The elastic coefficient of and total retail sales of consumer goods is 0.435766. The elastic coefficient of and consumer price index is 0.375222. It is thus clear that the money supply promotes a faster rate of investment growth, whereas it brings greater pressures to make the consumer market price go up. The growth of the nominal consumption may have been created more by the rising price.This article suggests that the monetary policy should be adjusted from aggregate adjustment to structural regulation. It requires more flexible monetary policy. The monetary policy plays a role of perspective guidance. It is the key of interest rates liberalization since it is conducive to establish the mechanism of risk evaluation and price determining in the capital market. It is useful for the capital market to play a big role in risk diversification and resources arrangement. The structural monetary policy plays a vital role in exploring the new economic growth engine and leading the capital into the correlative fields.