The Study On China's Excessive Liquidity And It's Assets Price Effect

The excessive liquidity means the liquidity of a bank excess the normal standard of the regular banking .In another words,it means the actual money stock has deviated from the balance standard. The thesis follows the basic study methodology of theoretic ,empirical and policy analysis and consists of 5 chapters. Chapter One: the current situation of China's excessive liquidityThis chapter discuss the expressions and cause of formation of China's excessive liquidity .It draws following conclusions:Excessive liquidity has became more severe in China,the expressions of which are the enlarging load-deposit gap,the high excess reserve ratio,the increasing load in banking,the overheating investment of fixed asset and the soaring asset price.The reasons which result in the excessive liquidity are as follows:first,the world's loose monetary policy has caused the global excessive liquidity;second,lots of foreign venture capital funds swarm into China;third,China's exchange rate system is lake of flexibility;fourth,the allocation structure of capital and labor is under unbalance;fifth,the structure of savings and investment is under unbalance ; the last,there's also structural unbalance in China's financial market.The path by which the premises transmit to the excessive liquidity is the overage supply of M2.Namely,current excessive liquidity result from the defect of China's economy structure and growth mechanism,through the overage supply of M2.Chapter Tow : the physical assets price effect of excessive liquidityThe main viewpoint in this chapter is that the excessive liquidity is driving the price of real estate increase which affect the real economy both theoretically and empirically,including wealth effect on consumption and Tobin's Q on investment. It draws following conclusions:The excessive liquidity is driving the price of real estate increase in the Liquidity Trap .Wealth effect will cause the growth of national economy,based on the Permanent Income Hypothesis, the Life-cycle Hypothesis and the LC-PIH Model.Tobin's Q effect will cause the growth of national economy through push the investment increase.Chapter There : the financial assets effect price of excessive liquidityThis chapter discuss that the excessive liquidity is pushing the price of financial estate increase which affect the real economy both theoretically and empirically,including wealth effect on consumption and Tobin's Q on investment. It draws following conclusions:Based on a typical IS-LM model,there are relations between asset price and liquidity.The increase of financial assets has positive wealth effect on national economy,while the decrease of financial assets has negative wealth effect on national economy.Tobin's Q effect of financial assets will cause the growth of national economy through push the investment increase.Chapter Four : asset price bubbles and financial stabilityThe main viewpoint in this chapter is that bubbles in assets price contain huge financial risks and the collapse of bubbles will endanger stability of the financial system.Currently,there are asset price bubbles in China's real estate market and stock market.The asset price bubbles will endanger stablity of bankingChapter Five : the countermeasures taken to bring the excessive liquidity under controlAs a chapter for suggetion,it is proposed that active measures should be taken up to bring the excessive liquidity under control,so as to prevent the asset price bubbles from bursting.To build an advanced bond market to absorb liquidity while implementing controlling policies.To reform the exchange rate regime to promote its flexibilityTo regulate investment, promote consumption and decrease the surplus favourable balance...