Research on the Relationship between Money Supply and Household Consumption——Verification Based on VAR Model

Abstract

Based on the social expectations of rapid economic recovery in the post-epidemic era, this paper takes the theory of monetary theory as the research perspective, and establishes a VAR model based on time series data from 1990 to 2022 based on the research mechanism of money supply and household consumption in academia, and uses the VAR model as the research method, and conducts empirical research on the correlation between M1 money supply, per capita consumption expenditure and per capita disposable income of residents. Exploring how to boost household consumption by adjusting the money supply under the impact of the epidemic, the results prove that there is a positive correlation between money supply and household consumption, and the relationship between money supply and household consumption is also indirectly affected by a variety of external factors. Based on the research results, this paper finally provides some policy suggestions for the formulation and effectiveness of monetary policy.