The Effect Of Moderate Currency Expansion On Economic Growth

The relationship between money supply and economic growth are always concerned by both scholars and senior government officials.Under the condition of price stability,How to gain a moderate increase in money supply to achieve sustained and stable growth of the economy is the goal of all monetary authorities.since 1990,China has been improving its market economy system and deepening its integration with world economy.After the financial crisis in Southeast Asia and the subprime crisis in the United States,China's economy still achieve a stable and rapid growth.In the process,the monetary policy of the central bank plays a vital role.based on this,this article is to explore how the central bank increase the supply of money moderately carried by monetary policy and then influence economic growthStarting with the nature of money,this paper elaborates on the issue of monetary neutrality and non neutrality,and summarizes the viewpoints of scholars at home and abroad based on it,which forms the theoretical foundation of this study,that is,the monetary nature is characterized by long-term neutral and short-term non neutrality.The second part of the paper is followed by the theoretical basis of the impact of money supply on economic growth.This part introduces the theoretical model of long-term neutral and short-term non neutral currency and the short-term non neutral model of money mainly includes three categories: sticky price,sticky wages and incomplete information.This part also introduces the transmission mechanism of short-term monetary expansion that promotes economic growth,which mainly including four transmission mechanisms: interest rate,exchange rate,credit,asset price.the third part of the paper begins to introduce how China's money supply is expanding.This part mainly introduces the growth path of M1 and quasi money and the comparison and analysis of M2/GDP index.It also introduces the mechanism and causes of monetary expansion.the fourth part of the paper mainly introduces the background and measures of China's central bank's monetary policy regulation since 1990,and its final impact on economic growth.The last fifth part is the measurement and inspection process of this paper,which is mainly an empirical analysis of the actual output and the price level of China's money supply.The conclusions are as follows:(1)The change of China's money supply structure is closely related to the formation and transformation of M1,quasi currency and mutual money.It also shows a gradual decrease in the ratio of M1 to the quasi money,and a gradual increase in the ratio of M2 to GDP.(2)since 1990,there is a positive correlation between the amount of money supply and economic growth in China.And from the impulse response function,the positive impact of money supply on economic growth is very large in the short term and tends to be stable for a long time.In addition,both the actual output and the price level affect the money supply,and the money supply is endogenous.In terms of the effect of monetary policy implementation by the central bank,from 1990 to 2007,the central bank makes a reasonable and moderate use of monetary policy to promote the rapid and healthy development of the economy.(3)However,since the subprime mortgage crisis in 2007,the magnitude and frequency of implementing monetary policy are large.In this crisis,the monetary policy of the central bank appears to be a little reluctant to adjust to the moderate regulation of the money supply.