The Impact Of Fictitious Economy Development On China's Money Demand

Based on the theory of the fictitious economy, proposing the definition and characterization of fictitious economy,this article gets the conclusion that fictitious economy is relative to the existence of the real economy, has its own unique system of price determination, as a way of economic operation and mainly rely on finance which grows in science and technology and financial innovation platform. Based on the theory of the fictitious economy, definition and description on the fictitious economy, this article analyzes the development of fictitious economy in China. Combined with theory of money demand, it is concluded that fictitious economy has a direct effect on the amount of money demand via trade effect, wealth effect, substitution effect, portfolio effect, and indirectly affects the amount of money demand through capital accumulation effect,employment effect, risk management effect, Tobin Q effect, information transmission effect, credit effect, deviation effect. At the same time fictitious economy affects the money demand structure index on behalf of currency liquidity through trading and speculative ways. The article is based on May 2001 to December 2010 monthly data. After analyzing the cointegration between several fictitious economy transactions, such as the stock market, bond market, futures market, fund market, inter-bank lending market and estate market, and China's money demand function, the article gets the following conclusions:1. The scale of fictitious economy has a positive effect on the amount of money demand, but its impact on money demand is still limited compared with the real economy.2. Size of futures market and inter-bank lending market has a significant positive effect on the number of M1 and M2 demand for money. The size of fund market transaction has a substitution effect on number of money demand, showing the reverse effect.3. At the stage of an upward trend for the size of fictitious economy market transaction, fictitious economy has positive effect on the M1 and M2money demand. But the outcome is opposite when the size of fictitious economy market transaction at the downward stage.4. When the size of fictitious economy market transaction is in a stable growth, its positive effect on the demand for money is more significant than that in a fluctuant growth.5. China's fictitious economic development will lead the increasing of money demand structural indicator M1/M2 on behalf of the monetary liquidity. According to empirical results, this article argues that we should properly handle the fictitious economy and real economy, optimize the internal structure of the fictitious economy and promote fictitious economy market-oriented and standardization. Attach importance to fictitious economy on the role of monetary policy and re-consider the choice of intermediate target of monetary policy.