Currency Non-neutral Theory

This paper focuses on the theoretical dimension of the fact that the change in money supply influences real economy, i.e. of the non-neutrality of money issues. It also provides an integrally uniform framework for monetary analysis.How to define the concept of the non-neutrality of money and the basic model of the non-neutrality of money, as well as how to analyze non-neutrality of money, is the starting point of this analytical framework. The model of the demand for money is the basic model of non-neutrality of money analysis. The relationship among money, relative prices and economic behavior supplies some analytical methods for the non-neutrality of money. Mainly including finite liquidity preference constrains, price stickiness constrains, inaccurate expectation constrains and non-full employment constrains which demonstrate the existence of the non-neutrality of money, the conditions of the non-neutrality of money constraints confine the framework of monetary analysis to the analysis of non-neutrality of money, covertly inclusive of the neutrality of money analysis. And therefore this dissertation, in the constrained framework of the monetary analysis, analyzes the realization of the non-neutrality of money. According to the conditions of the non-neutrality of money constraint, the changes in money supply influence production and employment by effects on the system of relative prices. The representative relative prices are those at the goods market (real prices), the labor market (real wages), the capital market (real interest rates) and the foreign exchange market (real exchange rates).Furthermore, the paper undertakes an empirical non-neutrality of money analysis of American and Chinese economic data by using lots of causal analysis including growth trend analysis, dynamic related analysis, pairwise Ggranger causality tests and impulse responses. It also indicates that these analytical methods can examine the effects of monetary policies while they cannot prove true or false of the non-neutrality of money theories.And finally, the dissertation, on the basis of synthesis and absorption of the pre-researches, carries out an innovative research on the non-neutrality of money to draw a conclusion that the analysis of the non-neutrality of money applies to monetarypolicies and the results of the analysis can instruct the practice of monetary policies.