The slowdown of China´s monetary velocity: A viewpoint from both short time and long time

The main target of monetary policy in China is the money supply, and according to the quantity theory of money, the national income, price level and the monetary velocity must be studied in order to set up the goal for money supply, which is harder to measure because it´s affected by many other interactive variables. In this paper, the monetary velocity, growth rate of money supply in the short time and especially its trend after the subprime crisis is analyzed firstly, then the model of monetary velocity is set up in a longer time from 1990 to 2009, showing that monetary velocity is going down in the long time. Finally, this trend and its reason are revealed.