The Research On The Currency Substitution In China

Currency substitution isn't a kind of new economic phenomena. In the fertile soil of the open economy, it all possibly exists under the different international currency system. Along with currency substitution phenomenon, the western economists have already begun its theory thorough discussions and the researches. At present there has basically been a system theory faction and a mature theory system. The general thought of currency substitution theory is to establish the theoretical formation model of the currency substitution in the related supposition foundation. It analyzes kinds of factors and the influence effects causing the currency substitution. The economists have generally concentrated the theory core in the design and the choice of native and foreign currency demand function in open economy. This is good to the study of currency substitution in China. But these theories selected various premise suppositions and explanatory variable and took different currency demand function form as the basic gist. There are big differences and limitation. Simultaneously in view of the fact that currency substitution in China also has many unique natures. This thesis pays great attention to the comparison of various theories. The theories'serviceability has been researched in China.The entity factors cause currency substitution to exist and to stand for a long time in future in China. Meanwhile, the realistic conditions of the anticipated factors such as the interest rate, the exchange rate and so on, and the system factors have decided that currency substitution scale will not be remarkable within a short term. But along with international economical contact closer day by day and money market opener, in particular the advancement gradually of free exchange in Chinese capital item, these factors'future development will enable to initiate the large-scale currency substitution. Moreover there are many influences to Chinese economy. It can't be allowed to neglect that the malignant currency substitution may even effect adversely. This thesis has simultaneously placed the currency substitution pro and con aspects efficiencies in a balance model to compare the income and the cost in order to reflect currency substitution comprehensively. At last in view of present domestic currency substitution's latent risk, the paper has proposed some practical, feasible and forward-looking measures to control the currency substitution in suitable degree and mostly eliminate its adverse effect.