The Liquidity Risk of Capital Flowing from the Real Economy to the Virtual Economy:Based on the Interaction between Scissors Gap of Money Supply and Asset Prices

Ren Yufei

doi:doi:10.16538/j.cnki.jfe.2017.10.003

Abstract

Based on the analysis of the interaction between scissors gap of money supply and asset prices, this paper theoretically and empirically analyzes the reasons for the phenomenon of capital flowing from the real economy to the virtual economy in the whole economy and resulting liquidity risk, and puts forward the route to the flow from the virtual economy to the real economy & effective measures.The empirical results show that the interaction between scissors gap of money supply and asset prices does have a regime-dependent structure, and the interaction strengthens when the economy goes into the regime with easy monetary policy and economic downturn. Although the zero-interest rate condition of liquidity trap is not being reached in current China, the interaction between scissors gap of money supply and asset prices is getting more intense, and the scissors gap of money supply goes reversely with the growth rate of GDP, showing the risks of narrowing-down space for monetary policy and the reduction in effectiveness under low interest rates; the risk of liquidity trap is still notable.