China's Currency Demand And Supply Of Empirical Research

The empirical analysis of money demand and money supply aims to make a stable money demand function, approach money supply factors fluctuating disciplinarian and the speciality of money supply transmission mechanism. After setup the model of money demand of our country ,the paper demonstrates the changing law of basic money and money multiplier, analyses the impact of finance and balance of payments on money supply,whereafter discusses the new problem that money supply is confronted in the process of economy reformation and opening.Based on estimating the long-term and short-term money demand function with the technology of cointegration and error correction, we find that the condition that high elasticity of income and low elasticity of interest rate to money demand in our country has not changed. Based on the practical review of managing channels of basic money, we find that the endogeneity of basic money weakens by using of Granger causality tests. Furthermore, the result of combination equation system indicates that the difference between legal deposit interest rate and legal loan interest rate is the most important to basic money. The influence of economic periodicity factors to narrow definition and broad definition money multiplier differ. In addition the results of cointegration analysis show that reserve-deposit rate affects money multiplier mostly.Although the pertinence is not high between fiscal income and expenditure and money supply in long term or short term, time lag phenomenon exists withal, we shall not ignore the impacts of fiscal income and expenditure and national debt circulation to money quantity especially to narrow definition money. Under the condition of opening economy and stare-ated exchange rate system, foreign currency is distinctly and positively correlative to basic money. By test we think that the off-setting measures of central bank past years are effective.Above all, the reformations of economic and financial system play a crucial role to the monetary mechanism in our country.