Study On The Impact Mechanism On Money Demand Of China By Internet Finance

As a new form of financial innovation, Internet Finance with its enormous data capacity?efficiency?low cost and high penetration rate has greatly impact on the money demand of residents, especially in their decisions of asset allocation. What's more, as the reformation of financial innovation goes deeper, researches about the impact of financial innovation on money demand stability has drawn ever-bigger audiences. However, domestic researches that using empirical evidence to analyze the impact of Internet Finance, as a financial innovation variable, on China's money demand mechanism are rare.Therefore, in this research, the writer firstly analyze the five different operation mode and characteristics of Internet Finance, as well as the way how Internet Finance influence the money demand. On the other hand, the writer also extended and mathematically deducted the Keynesian monetary demand theory and the modern quantity theory of money, in turn systematically demonstrated the impact mechanism on money demand by of Internet Finance. Secondly, by using data of January 2011 to June 2015, a total of 54 monthly data, to establish semi-parametric generalized linear additive model and the structure of vector auto-regressive model, the writer did empirical analysis of the stability of China's money demand function and income elasticity with Internet Finance as one of the variables. The study found that the Internet Finance impact the money demand of China by a mixed-up of linear and nonlinear mechanism. Specifically, the linear effect on money demand caused by Internet Finance is greater than the nonlinear effect, and the development of Internet Finance increases the monetary demand. While, the internet finance elasticity as the reduction function of monetary demand. The empirical results also confirmed that, after taking into account of Internet Finance, the coefficient of income elasticity exhibits a decreasing trend. Therefore, the Internet Finance has influence on the stability of money demand. This research also put forward suggestions from the following 3 aspects: selection of intermediate target of monetary policy?money demand measurement accuracy and the effect of risk control.