Influence Of Overseas RMB On Domestic Money Supply

With the progress of RMB internationalization,the cross-border RMB trade settlement gets a rapid development and the RMB offshore is booming.Then overseas RMB is increasing at an accelerating rate.At the same time,with the acceleration of the domestic financial liberalization reform and the broadening of the RMB circulation channels,the correlation degree of RMB offshore and onshore market rise.Under this background,with the continued expansion of overseas RMB,it will eventually have a significant influence on China's domestic money supply.Given this,The research on the influence of overseas RMB on domestic money supply has a vital theoretical value and plays a practical significance role in ensuring the people's Bank of China accurately regulate money supply,implement monetary policy effectively in the future and accelerate the process of RMB internationalization.The article theoretically discusses the mechanism of influence of overseas RMB on domestic money supply and studies its impact on base money and money supply.On this basis,the paper estimates overseas RMB by calculating the money demand gap from the first quarter of 2006 to the fourth quarter of 2015.Accordingly,the paper selects overseas RMB,domestic money supply,foreign reserves and domestic credit to establish variable parameter state space model.Granger causality test and the state space model are used to test the influence of overseas RMB on domestic money supply.The results prove that its impact on the domestic money supply is not significant at the present stage.We discover that the influence overseas RMB on domestic money supply is not quite evident due to the insufficient breadth and depth of current market.By comparing the impact of Eurodollar on the USA money supply from 1961 to 2005,the paper discover that at the beginning stage of the offshore market,the influence of overseas USD on US domestic money supply is not significant.However,overseas USD has a larger influence on US domestic money supply and the influence has become increasingly significant with the progress of offshore market.Moreover,it makes an analysis of the status of early period of domestic and international economic policy in United States,which is similar to China's current situation.Combined with the RMB offshore and onshore development situation at this stage,we can confidently predict that with the progress of RMB internationalization,overseas RMB will eventually have a significant influence on China's domestic money supply,which will threaten the stability of the domestic money supply.Lastly,based on the perspective of international monetary circulation,the paper analyzes the reasons about the difference between RMB and USD and proposes the main reason of the insignificant influence of overseas USD on US domestic money supply is the sluggishness of RMB backflow channels through analyzing the US dollar circulation pattern as well as puts forward corresponding suggestions for improvement.