An Empirical Analysis On China’s Excess Money

Since China’s reform and opening up, China’s financial sector of the economy as a whole has produced a series of major changes, there is a puzzling phenomenon between money supply, economic growth rate, inflation rate—in currency of the M2measure of Chinese money supply growth speed is more than the sum of economic growth rate and inflation rate for a long time. The phenomenon of excess money supply and the lower price level at the same time, and the violation of the traditional monetary quantity theory description about the relationship among money, output and the price, the paper called it "extra money" problem.Based on this, the paper amends the traditional monetary quantity theory equation in the comprehensive consideration of various factors, and analyses the excess money supply related economic phenomenon In-depth, and discusses its impact on the economy and financial system. The main idea is that:First of all, systematically comb the "extra money" problem research for so far, and evaluate the theoretical assumptions explain. Then, discuss the China’s excess monetary phenomenon in combination with economic theory. Respectively from the four kinds of the economic phenomenon:Chinese economy monetization, residents’ savings behavior, organic in the currency of the country, local economic competition, analyze the issues about the Chinese high M2/GDP ratio, Chinese residents precautionary savings motive, country hidden subsidies, local currency scattered distribution rights and others. then we can conclude that excess monetary phenomenon exists objectively in China’s economic reality.For the measure of the amount of excess money in China,most of the scholars still measuring method based on currency trading equation, but the assume that money velocity is constant in currency trading equation is no longer applicable in the current under the current situation of the development of China’s economy. Based on this, the paper adopts the method of the monetary overhang generally used abroad to measure China’s1991-2011degree of excess currency again. And on this basis, empirical test the impact of excess money in China’s on economic growth and prices. It is found that:there is a very significant impact of excess money on China’s economic growth and the price level, excess currency in the short term has a promoting effect on economic growth, and has a certain block effect on economic growth in the long term; and excess currency has a positive and profound and lasting impact on China’s price level. Finally, in view of the above phenomenon of the economic analysis and empirical test results, put forward the three policy recommendations as follows:make the more flexible and targeted monetary policy, promote capital market development, and real effectively push the marketization of interest rate financial regionalization.