The Influence Of Electronic Currency On Monetary Demand Of China

With development of internet technology and deepening of financial innovation,electronic currency has become an important part in people’s life gradually.However,the academia never reach a consensus about whether the electronic currency can influence the operation of monetary system or not,and how to influence it.In this paper,electronic currency is divided into two categories according to if it is independent to the monetary system: the computerization of money and virtual currency.On the basis of currency circulation,the computerization of money is divided into three categories: electronic funds transferring between banks,electronic currency used for fund settlement between individuals and banks,and electronic money for micro payment among individuals.According to issuer,virtual currency is divided into issued virtual currency and decentralized ones.According to monetary demand theory of Marx and western researchers,the paper analyzes the meaning of monetary demand and circulation path by adding financial activities（Financial market and Bank）,and acquires the conclusion that the value of income equals to monetary expenditure plus currency reserves and equals to monetary demand.Then,we put forward an optimized formula of monetary demand: M=ΣPT/V+C₁+C₂+C₃,that is to say,monetary demand equals to the trade amount of goods and services plus idle or retained money which is not used for trading.On the basis of the division of electronic currency and optimize monetary demand formula,this paper analyzes direct and indirect effects of the four electronic money（not including electronic funds transfers between banks）on the monetary demand theoretically,and arrives at following conclusions:（1）issued virtual currency has neither direct nor indirect effects on monetary demand;（2）electronic currency improves monetary demand directly by improving velocity of money and reducing transaction amount except issued virtual currency;（3）indirect impact on monetary demand of all electronic currency except issued virtual ones promotes the total amount of trade and increases the demand for money;（4）the combined influence depends on relative strength of the direct and indirect effects.According to theoretical analysis,we do regression analysis between electroniccurrency and corresponding strata of monetary demand respectively using partial adjustment method,and the results show that:（1）the M0 increases with the increase of electronic money for micro payment and decentralization virtual currency,and at the same time,the demand added adjusts gradually according to expected currency demand instead of happening immediately;（2）electronic currency such as bank card prompts M1 to add or drop to a certain stable level;（3）issued virtual currency has no effect on monetary demand;（4）indirectly impact of electronic currency is greater than the direct one.According to the analysis above,we put forward suggestions as follows:（1）the government and relevant regulators should enact relevant laws and regulations and regulate issuers and circulation of electronic currency;（2）the limitation of electronic currency should be relaxed appropriately;（3）the central bank should pay attention to time lag when adjusting monetary supply level based on electronic currency circulation.