Research On Interactive Effects Between Fictitious Economy Development And Money Supply

As of outbreak of the 2008 Financial Crisis,all the influenced states have made attempts to stimulate economic recovery with easy monetary policies,leading to rapid growth in fictitious economy led by real estate industry and financial industry rather than continuous progress of the real economy.At the 2017 China Development Forum,Director of the National Development and Reform Commission(NDRC)He Lifeng clarified the three structural imbalances in contemporary China,namely structural imbalance between supply and demand in the real economy,imbalance between the financial industry and real economy as well as that between the real estate industry and real economy.Obviously,traditional monetary theories turn inadequate for rational explanation on money demands in view of co-existence of excessive growth of money supply,downturn of the real economy as well as expansion of fictitious economy in China.Hence,the relationship between the monetary“investment trend from real economy to fictitious economy” and “divergence of fictitious and real economies” shall be figured out.Only in this way,the imbalance between real economy and fictitious economy can be solved fundamentally.Hence,based on classic money demand theories,the paper makes differentiation of money supply in the real and fictitious economies and expands the Fisher Equation of Exchange so as to find the relationship between the real-fictitious economic divergence degree and the money supply with mathematic approaches.In addition,the result was empirically tested with two vector auto-regression models established from the perspectives of gross and structure.As found,a positive feedback mechanism exits between the monetary“investment trend from real economy to fictitious economy” and the fictitious economy,but the positive effect of fictitious economic money supply on the divergence multiple of fictitious and real economies significantly prevails over the negative effect,namely more money demand of fictitious economy will boost the economic divergence.Additionally,in comparison with the real estate industry,the financial industry interacts with money supply more significantly,indicating that the monetary sediment effect is stronger in the financialmarket.In the end,corresponding countermeasures and suggestions were proposed aiming at those conclusions.For example,control of the monetary “investment trend from real economy to fictitious economy” is the premise for effective improvement of “divergence of fictitious and real economies”,wherein it is necessary to emphasize structural effects on money supply,which are generated from fictitious economy represented by financial and real estate industries,and give rational guidance in rational distribution of monetary capitals between fictitious and real economies.In addition,structural effects of money supply quantities and policies concerning interest rates differ in the real estate and financial industries.Specifically,interest rate related policies play a more effective role in regulation of the real estate industry,while effects of “money ineffective cycle” in the financial industry on money supply shall be highlighted during supervision of this industry.