The Importance Of money Velocity Analysis In Macroeconomic Research

Abstract：Velocity of money circulation because of its great theoretical and policy implications， so it runs through studies conducted in western economics development process of the whole.Changes in the money supply will affect the economic growth and inflation rates among the conduction velocity of money assumed an extremely important role.The country's macroeconomic monetary velocity is not able to stabilize， once the instability occurs where variation， what factors affect the vulnerable， are guiding China's current monetary policy has significant value.Based on the velocity of money circulation on the overview， we discuss the analysis of foreign scholars and domestic scholars velocity of money in the importance of macroeconomic research.

Key words：Scholar；Macroeconomic research；Money velocity ；Importance

Since China's implementation of reform and opening up， economic develop fast， there have been a very big change. Institutional begin the conversion from the old planned economy to a market economy， the total economy also continued to maintain high growth， industrial structure， too， are constantly changing， development of capital markets from zero and have been developing very fast. China's monetary velocity before the reform and opening up has always been more stable. After the implementation of the reform and opening up， economic system and financial system reform led to the emergence of the velocity of money continue to reduce the trend rate of change among the short-term and not sufficiently clear. These changes led to the government after the enactment of the effectiveness of the monetary policy and the implementation of difficult to grasp. In view of this， there is need for further analysis of monetary velocity constraints of many factors. Generally speaking， the study explored factors often limited interest rates， inflation and economic monetization for monetary velocity will result in what affect， and are concentrated in the real economy. In fact， to explore the factors that lead to the various aspects of monetary velocity decline， it should also be analyzed from the perspective of the virtual economy. This requires that we attach great importance to the importance of macroeconomic research in monetary velocity analysis， and thus lead to more in-depth understanding of the factors related to the velocity of the decline and the impact of other factors on monetary velocity caused.

1. Monetary Velocity Overview

The so-called velocity of money circulation， mainly refers to reflect the period of time among certain currency and the flow rate during this period and the average stock of currency between， it belongs to the concept of monetary economics. Macroeconomic research for the study of the importance of monetary velocity， always one of the hot topics among monetary economics. Whether in theory or in reality being among the factors involved to discuss monetary velocity has the stability of its never-ending. Given the continued development and economic development of the market tend to be increasingly complex， so that the velocity of money circulation becomes extremely difficult to grasp and predict the variables. As a result， many Western countries will allow the Government to supply the amount of money is not able to accurately act as monetary policy-making process of the Mediator appeared hesitant mood， because this assertion is directly dependent on the velocity of money circulation harmony and stability can not assume that this premise.

2. Analysis Of Foreign Scholars On The Importance Of Macroeconomic Research In The Velocity Of Money

（1） Three classical theory of macroeconomic research and its important influence

First， the early classical quantity theory of money. In the early theory of money among the first drawn expressions and forms a huge impact on their studies after Fisher was founded in 1911 trading equation， namely MV = PT. Where M is the quantity of money， F is the velocity of money， P is the price level， and r is the total trading volume. The equations have the following meanings： First， r is the total social product contains all involve monetary transactions， including the so-called intermediate products. Therefore， the equation of exchange among the V is the turnover of the currency. This sense above velocity of money has been the researchers called velocity of money transactions. Second， the change in velocity Fisher felt the emergence of short-term money is very small. Once assume F is constant， the total transaction volume T is also fixed， then lift the money supply will inevitably lead to price levels appeared proportional rise. Marshall and Pigou from another perspective to deal with the demand for money. They have developed the Cambridge equation， M = kPY. The formula in the form of money is saved A wealth occupy the full nominal income ratio， T is the form of reciprocal currency's velocity. The formula for the further development of the theory of monetary velocity is very important.

Second， the theory of Keynesian demand for money. Cairns previous studies， monetary velocity constant belongs. Keynes proposed in 1936 on the three holding money motive， which is to consider the transaction motive， motive and speculative motive prevention carried out to arrive at the most prestigious of the money demand function formula M = F （Y， i）. According to this formula， the velocity of money income described as： K = Y / F （Y， i）， is the velocity of money is a function of income and interest rates between nominal and interest rates and a positive correlation. According to this theory， the velocity of money has brought a very strong operability. This is because it does not require a stable variable. Cairns after economists Baumol， Tobin and Whalen and other motives for holding money three more in-depth exploration of the model to better clarify the interest rate affect the demand for money in this important conclusion.

Third， monetary theory science Friedman. Monetarist Friedman Modern Masters study the quantity of money in 1956. On this important monetary theory， money demand function it is proposed： M / P = f （rh， rc， 1 / p， dP / dT ， w， Y / P， u）. Wherein rh， rc nominal yields as bonds and equities has， that is， represents the rate of inflation， that is， non-human wealth and human wealth ratio， M / P is permanent income， u is a personal hobby. With the above modification may be formed PM / M form， which is the velocity of money. Friedman's view is that changes in interest rates will affect the stock and bond yields has， but also related to the rate of return of currency holdings， will be between the two cancel each other out， so does the interest rate for the velocity of money circulation How much influence. Velocity of money circulation in general depends on permanent income， this income fluctuate significantly less than income， so fluctuations in the velocity of money is very small， and is accurate to predict.

（2） Monetary Velocity important value under the three classical theory

Above the three most important theory relates to monetary velocity， for subsequent theoretical and empirical study of monetary velocity are an extremely important guiding value. The main value can be summarized in three aspects： First， to re-define the meaning of Regulation monetary velocity， the importance of laying the income velocity has. From the above three theories can be found， Fisher equation focuses on the exploration of the velocity of money has， Cambridge equation Keynes， Friedman et al theory is focused on the study of income velocity. In this case， the income velocity of circulation has a dominant position， this is not only due to the trading volume statistics have considerable difficulties， but also because there is no direct relationship between velocity and transactions demand for money， even measured the flow of transactions speed is often difficult to measure due to the economic system among the total trading volume and has a very limited amount of guidance value of monetary policy. Some researchers think that trading volume can be set to have a certain proportion of national income and the relationship between. Given this， the transaction velocity of circulation of only one of multiple income velocity， and the income velocity is possible to cover all of the information， there is no need to introduce the velocity of transactions. Second， the velocity of money and the demand for money from the theory appears to have very close ties. Demand for money is equal to the national income minus monetary velocity， so that the linkages between demand for money and money circulation velocity， has a very close relationship. One of the important points of the three disputed theory is that the velocity of money is not constant. So， a lot of empirical research more concerned about monetary velocity is not able to remain stable once is not stable enough， and what factors to be determined. In addition to income and interest rates， some researchers are still theoretical study results on monetary velocity may cause all kinds of factors， for example， Bordo and Jonung hypothesis elaborated monetary system in 1987， the degree of monetization， bank universal health， financial stability and economic development of institutionalized factors deemed to quantify.

Once the set is not part of monetary velocity constant， then the subject of what it will study the impact of variables has been far beyond the above three factors theory itself has， and these developments are generally derived from the empirical verification of the Ming. An Empirical Analysis of Western countries researchers conducted monetary velocity is very large， the main directions are the use of econometric models to study the velocity of currency-related income， interest rates and inflation， the stock market and real estate， financial innovation， and many other factors monetary velocity caused by various influences. However， all of the above factors are all influencing monetary velocity caused against Western countries researchers are often drawn conclusion is contrary even opposite to each other. In the eighties of last century into the future， he found the modern velocity of money is showing more and more unstable. Therefore， I think foreign researchers to study monetary velocity has entered into the predicament， not yet reached stable and convincing people of monetary velocity correlation function.

3. Analysis Of Domestic Scholars Velocity Of money In The Importance Of Macroeconomic Research

（1） Macroeconomic Situation velocity of currency research study in China

Our researchers study conducted monetary velocity has spent a lot of energy. Early in China's implementation of reform and opening up previously， a number of researchers to come to practical economics-based Chinese actual velocity of money equation， that is， total retail sales and the money in circulation is among the cash ratio is 8： 1 ， with a fairly stable monetary velocity. However， China has entered the reform and opening up， because of the economic system from a planned economy into a market economy， people find that the formula has failed. After the reform and opening up， the 1980's， China's monetary velocity gradually slow down， and to the recent years， China's M2 / GDP ratio is to create a new high. Income velocity of money is continuing to slow down has become an important fact. Analysis of China's monetary velocity can be found and China's M2 / GDP data on High are closely combined. An income amount of money equation MV = PY， where Y is the national income， it is for real GDP variable， M is based on its caliber M2， also based on its actual M2 variable， respectively， after both sides take the logarithm and then the time derivative， so to be able to give M2 growth rate equal to real GDP growth plus inflation rate minus the rate of M2 velocity. Once the velocity of money can be kept stable， it should be the sum of M2 growth of real GDP growth and inflation rate. That is， once the M2 growth rate higher than the increase in real GDP， the result will be inflation. However， our situation is the reality， M2 growth rate much higher than the increase in real GDP， but did not appear serious inflation， the phenomenon is currency research enigma of China. From the above expression， abnormal M2 / GDP M2 represent high velocity gradually decreased. In fact， M2 velocity of the growth rate of M2 growth minus real GDP growth and inflation in the future of the difference between items. Some researchers use monetary velocity decline to explain the mystery， it is obvious tautology belonging cycle. The researchers also explained， in fact， the only currency in circulation speed indicator represents the difference between items. It is difficult to increase the growth rate and the inflation rate explained all included in M2 monetary velocity decline among the velocity of money has apparently become garbage indicators. Through the analysis of academia on monetary velocity explore the meaning of the experience can be found， from the income velocity of money when it submits no significant economic implications， but was identified as nominal GDP and the ratio between the amount of money. Once solely the ratio study， it has economic meaning itself is not accurate enough， put it as a trash indicators have some basis.

（2） Macroeconomic Research of important value in monetary velocity studies

First， the direct impact of the currency's velocity factor elaborate. If the definition of currency directly apply the income velocity under the decline of monetary velocity occurs is recognized. Among the theories which， among the most important currency of the hypothesis of a theory. Yi Gang， the researchers pointed out that as China from a planned economy to a market economy in transition to be a great need for the use of the currency as the main medium of goods and services， so the market must have excess money supply to accommodate additional monetization of the development process， so to will result in monetary income velocity appeared to continuously reduce. Sun Jian and then oct proposed monetization process covers not only material goods emerging monetization， but also emerging monetization service； not only covers the assets monetized traffic， but also the stock of the asset monetization， so that Chinese the monetization process is far from over declaration.

Second， the real economy and virtual economy dichotomy. Virtual economy tends to shunt out of money， so that will affect the speed of money circulation. A large number of scholars have proposed a similar view， and empirical research into the introduction of the stock market and other related indicators to reflect the virtual economy to explain the variables. Meanwhile， there's concern to study the characteristics of the trash monetary velocity has， and presented new research perspectives. Wu Chaoming propose ideas divide the real economy and the virtual economy， thereby decomposing the amount of money the real economy as well as the amount of money the virtual economy， the formation of a monetary circulation flow development model covering the real economy and the virtual economic system， but also redefined the entity virtual state is not the same velocity of money. He felt that only realized the money supply in accordance with a reasonable proportion allocated to the real economy and the virtual economy into whether the real economy and the virtual economy to achieve coordinated development， directly related to the price of the asset.

Third， the return on currency transactions velocity of Inquiry. Conventional theory in explaining changes in income velocity tends to encounter difficulties. Some researchers have proposed to pay more attention to transactions conducted study based on velocity. Liu Zhihua analyzed the difference between the velocity of transactions and other countries， which proved since China's implementation of reform and opening MZM transaction velocity has remained stable. Feng Fei integration in the analysis of virtual market turnover of information， the study covers the stock trading and other transactions related to the velocity of money， and the money changed accordingly caliber join customer margin securities companies. Through analysis can be found， the fluctuation velocity of transactions that appear with a more significant pro-cyclical characteristics， and the synchronization velocity and volatility in trading income velocity after 2000 has began to disappear， it appears between the divergent trend. Hou Ying and Chen Jianing applied in the study of China's GDP， the total turnover of the stock issuance amount of the total turnover of futures， as well as to define the overall turnover index currencies， and redefining the velocity of circulation of currency transactions， using vector error correction model to demonstrate clearly between the new velocity of money and several variables remained relatively stable with the conclusion of a function. Advances from the current observed， the velocity of currency transactions not yet achieved a new breakthrough in the great achievements， one of the reasons include： First， on how to calculate the total volume of transactions has always been controversial. Liu Zhihua cash balance sheets of financial institutions among the sales of goods and services business income and other subjects deemed most of barter in the amount of MZM year to complete. Feng Fei point is to use the bank account debit total amount to be judged， but has not yet started because of the statistical indicators， so I had to use the total amount of non-financial corporate funds flow of funds among the residents and government of the three parts， total stock turnover amounted to domestic debt issuance and the amount to be substituted. However， this way， the study based on currency transactions carried velocity is extremely lack of guidance value policy. Even to get the data， the model can explain it currency trading velocity in the history of the case change， and thereby estimate the future trends in currency trading velocity， but due to the volume of transactions is difficult to control the currency， the central bank also hard thus be regulated quantity of money. In fact， the speed of circulation of currency trading currency turnover number is an indicator of anthropogenic be defined. Once the calculation is relatively large degree of difficulty and the lack of meaning of the policy， that the velocity of currency transactions will be compared with the velocity of money income is more a lack of real value to a garbage indicators.

4. Conclusion

In summary， by domestic and foreign scholars present comments on the importance of macroeconomic research in the velocity of money can be found among the velocity of money can apply directly to the development of clear and Empirical Study of variation they possess. Currency Circulation Speed Theory and always have been the practice of having a strong guiding role. Traditional implementation of monetary velocity function of a conventional Western researchers and income-based variable interest rate， to the seventies of last century later， as financial innovation and regulatory relaxation and other factors led to the prediction of the traditional function of velocity of money circulation becomes increasingly bad. As a result， the speed of the importance of research in macroeconomic research money circulation will gradually fade out to explore the scope of mainstream economics researchers. To fully explore the nature and depth of the problem， it should really open the black box， and open the black box it means to separate the needs of different currencies having a presence and status， in order to analyze the real reasons for monetary growth， which confirms the unique value of monetary velocity studies.