Research On The Influence Of Virtual Economy On Inflation Under The Money Supply Mechanism

High growth,low inflation and rising asset prices are the important characteristics of China's economy.In the context of the rising money supply,what is the constraint on price fluctuation?Studies have shown that the impact of money supply on inflation is declining.On the basis of this research,this paper studies the problem from the perspective of virtual economy.Firstly,this paper reviews the causes,effects and the relevant research of inflation in virtual economy and money supply mechanism.Then,based on the evaluation of the virtual economy crowding out,the development of virtual economy has been characterized by the evolution of virtual economy and real economy since the reform and opening up.On the basis of the existing theories,based on the panel data of 31 administrative regions in the past 2002-2015 years,we use the system GMM estimation method to empirically test the influence of virtual economy extrusion on the inflation under the money supply mechanism.The results show that the virtual economic extrusion effect has a significant negative impact on inflation under the monetary supply mechanism.For every one percentage point increase in the virtual economy,the response coefficient of inflation to the increase of money supply will fall by 0.026 percentage points.And this negative effect shows obvious continuity,which means that the virtual economy has absorbed the hyperactive currency and masked the risk of inflation briefly;Local protectionism,opening degree,regional investment and fiscal expenditure indicators show a positive impact on inflation.The degree of Marketization and consumption level indicators show a negative impact on inflation,while urbanization index is lack of explanatory power.The estimation results of subregional samples show that the virtual economy extrusion has a stable explanatory power on the negative impact of inflation in the eastern and central western regions,but the influence in the eastern region is more intense.As two major components of the virtual economy,the real estate and the financial industry all show negative influence on inflation.However,the effect of the real estate industry is stronger than that of the financial industry,which indicates that the real estate industry has a stronger absorption capacity of the super-charged currency.Finally,this paper gives corresponding policy suggestions from the control of money supply,the relationship between virtual economy and real economy,and the differences between regional and industry.