Research On The Effects Of Changes In The Money Supply Since 2007

As the intermediate target for monetary policy,money supply has become the significant means of the Central Bank to achieve long-term goals.The PBC adjust the stable development of economy by controlling the money supply.The relationships between the money supply,the GDP and the CPI has always been a matter of social concern.The growth rate of GDP is as high as 14.16% in 2007,the CPI index was 4.8%,in 2008 the CPI index continued to rise,reaching 5.9%.To prevent the economy from overheating and inflation,The PBC execute the tight monetary policy.And when the impact of the global financial crisis comes to our country,The PBC began to implete a moderately easy monetary policy, a sharp increase in money supply to keep ample liquidity in the banking system,stimulate economic recovery.While other countries taking steps to deal with the impact of the financial crisis,the growth rate of GDP remained stable in our country,accompained by CPI rising,The CPI is as high as 5.1%.The emergence of inflation is inevitable,but inflation for a long period of time can cause a lot of trauma to a country’s economy.In view of the serious inflation in our country,The PBC implemented prudent monetary policy in 2011.The CPI fell to below 3% in June 2012,and the CPI is 2.6% in 2013.In 2014 the CPI was 2% and the GDP growth rate was 7.5%.The CPI was reduced falled slowly from May,2012.And GDP growth rate is at 7.5%.In the first quarter of 2015,the GDP growth rate is 7% and the CPI is 1.2%.Our country’s economy keep stable growth under the new normal.As the goal of monetary policy is to maintain stable currencies, and thereby promote economic growth.So this article using quarterly data from 2007 to 2014,with GDP represents the economic growth,the CPI on behalf of the price level,M0、M1、M2 represents money supply,with Cointegration Test,Error Correction Model,Granger Causality test and Impulse Response Analysis and other empirical methods,to explore the impact of GDP and CPI acorrding to the change of money supply.As the money supply may cause the change of the other factors,such as the balance of payment are not discussed in this paper.This paper was divided into five parts.The first part of this paper is introduction.The introduction included the research background and research significance of the paper,related literature review both at home and abroad,research methods and idea,innovation and deficiency.The second part of this paper is data selection and research methods.This part includes the selection of data used in the empirical analysis and its pretreatment.These quarterly datas are GDP,CPI,M0,M1,M2 from 2007 to 2014.The empirical methods used in this paper are conintegration test,error correction model,granger causality test and impulse response analysis method of introduction.The third part of this paper is empirical analysis of the money supply and the GDP.This part use empirical methods to study the relationship between money supply and economic growth,According to the conclusions,the money supply and GDP has a long-term and stable relationship.The money supply has a significant influence on economic growth,it can promote the economic growth.The money supply and GDP are granger reasons,it can promote the GDP,Money supply and GDP are granger reasons,that China’s currency has the characteristics of neutral and endogenous,but monetary policy has about half a year lag.The fourth part of this paper is empirical analysis of the money supply and the CPI. This part used empirical method to study the relationship between money supply and CPI.There is a cointegration relationship between money supply and CPI,they have a long-term and stable relationship.The money supply has no marked impact on CPI, M0,M1,M2 are not the granger cause of the CPI, the conclusions denote that the change of the CPI is influenced by other variables outside of the money supply.The fifth part of this paper is policy suggestions.The PBC should rationally regulate the money supply to promote GDP,and to control the price within reasonable bounds.On the one hand,The PBC should handle the relationship between money supply and GDP,so that we can better promote GDP by regulating the money supply.On the other hand,The PBC should handle the relationship between money supply and CPI,not only have a good understanding of the relationship,but also pay attention to the flow of money and structure,prevent imported inflation,keep prices at a reasonable area.