Research Of The Influences Of Electronic Money On Money Supply Of China

The development of science and technology greatly changes people's way of life and promotes all aspects of social changes.The invention of the computer and the Internet in twentieth Century not only completely changed people's life,but also changed the currency form,creating a new medium of exchange-electronic money.Based on an overview of different organizations' definitions of electronic money,a definition of electronic money is given from the perspective of electronic digital.Electronic currency has the functions of the traditional money,and also has the new characteristics which are different from the traditional money,for example,the virtualization of monetary form,low transaction costs.So it is very a strong substitute for paper money and has a profound effect on the structure and total amount of money supply.The widespread circulation of electronic money has gradually make the boundaries of money levels not distinguished,increasing the difficulty of dividing money levels and making a shift from the low level to the high level of money supply.Electronic money changes the cash and the reserves in the economic system through affecting the behaviors of the public,the commercial banks and the central bank.The cash in circulation is reduced;meanwhile the reserves of commercial banks are increased.Thereby,electronic money affects the quantity and structure of the base money change and increases the money supply and also increases the difficulty of the central bank to control the money base.According to the theory of money multiplier,there are four factors that determine the money multiplier:currency ratio,deposit ratio,required reserve ratio,the excess reserve ratio.The emergence of electronic money makes these four factors change significantly,and then expand the broad money multiplier,but the impact of the narrow money multiplier is uncertain.In order to analyze the impact of the electronic money on the multiplier,this paper selects the annual electronic money data of 1995-2014 in China as sample and establishes the long-run equilibrium equation and short-term fluctuation equation between money multiplier and electronic money by using co-integration analysis and error correction model.The model displays:in the long run,the increase of electronic money expands the broad money multiplier;in the short term,electronic money makes the money multiplier deviate from equilibrium position,but the error correction term can pull it back.Through the analysis of electronic money's influence on the money base and the money multiplier,the electronic money expands the money supply.In order to further analyze the expansion effect of electronic money on money supply quantitatively,this paper,by using the theory of the deposit creation of commercial bank,measures the size of money supply created by the money creation mechanism of electronic money based on replacing the cash.At last,according to the preceding researches,this paper puts forward some policy suggestions:to clarify issuer's qualifications,to manage the issue processes of electronic money,to optimize the monetary policy intermediary target.