The Research On The Abnormal Relationship Between Money Supply And CPI In China

The traditional quantity theory of money considered that there was a direct proportion between money supply and CPI. That is to say, in theory, the money supply increase rate should equal to the sum of increase rate of CPI and economic growth when the currency circulation is stable, and this was regarded as an economic principle in long term. Based on a brief review of the general theories of the relationship between money supply and CPI, the thesis illustrates that the increase rate of money supply is greater than the sum of CPI increase rate and economic growth rale through analyzing the facts of the relationship between money supply and CPI in China. It's quite different from the previous principle, but appearances as an abnormal relationship.In order to explain the abnormal relationship, the thesis introduces some theatrical explanations about the abnormal relationship in China, briefly expounds on the limitations of its existence, and attempts to seek a new theory to explain this basis. Based on the structural changes in money supply and the structural changes of monetary demand, it analyzes the impact on prices and comes to realize that the abnormal relationship between money supply and prices in china is not due to the anti-conventional passive relationship with the increasing of quasi-currency capital market or the segregation of money supply which can weaken the impact of money supply on prices. China's savings deposits and quasi-money are mainly non-monetary and financial assets such as shares in the capital market, the currency in circulation. Therefore, in the light of savings and capital markets of China's currency, the author carries out an empirical analysis on the relationship between conventional, From a practical point of view, China is stranded due to the growth of savings and financial stocks such as non-monetary assets accumulated, a leakage of money supply to the real economy, and the direct impact on prices when the supply of money can not go into economic entities. There are the real causes of the anti-conventional relationship between money supply and price changes. The deficiencies of monetary system which is the systematic element that causes the anti-conventional relationship, is hidden behind money supply and prices. This paper illustrates the disadvantages of our traditional system of property rights, and analyses of the relationship between it and money supply leakage mechanism and draws a conclusion that the systematic root of the abnormal relationship between money supply and price is the inefficient allocation of resources because of our traditional system of property rights. Based on the above analyses, the author proposes to dredge the system of transferring savings into investment, standardize the development of the capital market and accelerate the reform of the property rights system.