By Xia Bin, Gao Shanwen, Chen Daofu　

Date: 2003/11/03

Abstract：

After analyzing the circulation speed of M2 since 1985 in light of historical trends and assuming the historical trends as system decisive factors, the paper points out the deviation of the circulation speed against historical trends and takes it as the measurement for appropriate money supply. The paper goes on checking the links between the circulation speed and future economic fluctuation and maintains that these links do exist and the circulation speed coincides with the theoretical expectations. Given the fact that the lagged circulation speed varies with different periods of time, it thinks that whenever the circulation speed is 0.01 under historical trends, the economic growth will increase by 0.3 to 0.6 percentage points.