Test Of The “Currency Neutrality” Hypothesis

In order to adapt to the changes of the international situation and the needs of social development,General Secretary Xi Jinping first proposed the “supply side” reform on November 10,2015.Promoting the development of the real economy through financial means is a major task of the “supply side” reform,and monetary policy is the most commonly used means for central banks to regulate financial markets.However,the effectiveness of monetary policy determines the final effect of monetary policy implementation.Until now,the academia still has controversy about the effectiveness of monetary policy.In order to analyze the nature of China's currency and judge whether China's financial system strongly supports the reform of the real economy in the “supply side” reform,on the theoretical level,this paper firstly analyzes the relevant theories about the “money neutral” hypothesis of different theoretical schools,and then analyzes the monetary policy of before and after the “supply side” reform;On the level of empirical analysis.Starting from the macro-policy background of the “supply side” reform,this paper uses the quarterly data from 2008 to 2018 to construct a vector autoregressive model to empirically analyze the monetary nature of China.The empirical test results show that: “in the short-term and long-term,China's currency is non-neutral,and monetary policy is effective.” On the basis of the empirical test of the “money neutrality” hypothesis,this paper uses descriptive statistics and nonparametric tests to compare and analyze the financing amount and credit structure of the financial system which supports entity economy before and after the “supply side” reform in China,The empirical test results show that “from the view of the amount of financing,there is no significant difference in the average level of social financing scale before and after the “supply side” reform;from the view of credit structure,there is no significant difference at the average level of credit stock of Chinese manufacturing,real estate,and construction before and after the “supply side” reform,and the average level of credit increment of Chinese manufacturing before and after the “supply side” reform exists significant.difference,while the average level of credit growth in the real estate industry and construction industry doesn't exist significant difference,which shows that Chinese financial system strongly supports the “supply-side” reform at certain degree,but it still needs improve in terms of the amount of financing and credit structure.Finally,this paper proposes policy recommendations from the industrial structure,monetary policy and fiscal policy,policy system and financial reform to promote the “supply side” reform of China.