Research On The Increase Of China's M2/GDP Ratio

Since the reform and opening up,China's broad money supply M2 has shown a clear upward trend.In 1978,M2 was 115.91 billion yuan,and it increased to 167680 billion yuan in 2017.By calculating relevant data,basically,the annual GDP growth rate is less than the increase of M2.The speed of China's M2/GDP ratio has continued to rise.In 1978,the M2/GDP ratio was only 31.5%,and it increased to 202.73% in 2017,an increase of 5.4 times,the growth rate is staggering,and it is also significantly higher than other countries through vertical comparison.It shows that there may be currency super-discovery in China,and China's economic development may also have different characteristics from other countries.Therefore,it is necessary to explore the issue of the rising ratio of China's M2/GDP.Many scholars have carried out the analysis of the reasons and put forward some suggestions for the problem of high M2/GDP ratio in China.This paper first studies and combs the relevant literature;explains the meaning of M2/GDP,and introduces the development of money supply and money demand theory.Then carries on the longitudinal analysis and horizontal analysis of China's M2/GDP ratio,the longitudinal analysis is based on China's M2/GDP related data since the reform and opening up,describes the development process of China's M2/GDP ratio,and analyzes its structure and trend through measurement software,and draws its long-term and cyclical characteristics of development and change.The analysis compares the ratio of China's M2/GDP with other countries,and analyzes the status quo higher than other countries.Then it analyzes the reasons for the increase of China's M2/GDP ratio from the perspective of money supply and money demand.From the perspective of money supply,it is phased,mainly because foreign exchange accounts and re-lending in different time periods lead to an increase in the base money;in terms of money demand,it is mainly the monetization of commodities and capital elements,and the utilization rate of bank credit funds.Low demand for money,high savings rates,and underdeveloped financial markets have led to increased demand for money.Then an empirical test was carried out,and several quantifiable indicators were selected:economic growth rate,savings rate,currency circulation speed,domestic credit ratio,stability test,cointegration test,error correction,Granger causality test to verify the influencing factors Finally,it illustrates the impact of the increase in the M2/GDP ratio,and proposes suggestions for enhancing monetary policy independence,controlling currency over-issue,improving the social security system,optimizing the financial market structure,and improving the utilization rate of bank credit funds based on the above-mentioned influencing factors.