The Empirical Research Of The Money Supply To Social Consumable Total Retail Sales

Since the financial crisis of2008, in response to cope with the serious impact ofthe global recession, China has developed a loose monetary policy and began toincrease the money supply, especially the broad money supply increased sharply. Thepurpose of easing monetary policy objective is to drive the domestic demand andstimulate the residents’ consumption. The currency is usually divided into three levels,namely, the cash in the circulation, narrow and broad money which the most of theflow of cash is in circulation and the broad money is the opposite side. Be judged fromthe pure in theory, because the consumer needs currency, and the increased moneysupply can make people have more to promote consumer confidence in a short time, soas to stimulate the consumption. As consumption consumption will generate theliquidity of the currency, namely, the stronger the liquidity effect on consumption isbigger, so the cash flow impact on consumption is greatest, then the narrow money andbroad money is weakest. But in real life, the money supply affect consumptionactually exist?If there is, how much? In view of this problem, this paper focuses on themoney supply affect residents’ consumption.During the study, residents’ consumption situation is said by the social total retailsales of consumer goods and the money supply is re-divided into three types which arecash in circulation, a part of the narrow money supply minus cash incirculation(demand deposits, and credit card and check deposits), a part of the broadmoney supply minus the narrow part(i.e. quasi currency ratio). Selection,from January1996to October2012monthly data,is the money supply and total retail sales of socialconsumer goods, according to a study in the seven years of data analysis, cointegrationtest, and establish the vector error correction model and vector autoregression model,respectively for three kinds of money supply and the empirical relationship betweenthe total retail sales of social consumer goods for detailed research. In order to makes adeep analysis to the research conclusion, which concludes that the money supplyinfluence on residents’ consumption level.Based on this, some policy advices areadvanced to promote the residents’ consumption.The main conclusions of this study are: there is a certain influence on the moneysupply to the residents’ consumption, mainly cash in circulation and quasi-currencyand the influence on consumer is a long-term, stable positive, but the influence issmall, the proportion of cash in circulation is less than7%, and the quasi currency lessthan3%;At the same time,checking accounts and credit cards deposits will also havecertain influence on residents’ consumption, at about6%, but the effect is not stable for a long time, that is mean it changes larger over time.