Study of the Impact of Inflation, Money Supply on Economic Growth

Abstract

In a complex and volatile economic environment, the stability and sustainability of economic growth have always been the focus of attention for Governments and economists. Economic growth is not only a matter of national prosperity and stability, but also has a direct impact on the quality of life of the population and the overall well-being of society. However, the process of economic growth is often influenced by a variety of factors, among which inflation and money supply are two crucial economic variables. This paper selects the relevant data of China's consumer price index CPI, broad money and quasi-money supply M2 and gross domestic product GDP from 2003 to 2022 as the corresponding variable indicators, constructs the multiple linear regression model, and conducts the significance test for the model through statistical inference test, econometrics test, and other methods and makes relevant corrections to the model, and then arrives at the optimal model. The analysis shows that there is a close relationship between inflation and money supply, and inflation is an important factor driving China's economic growth, while changes in money supply have a relatively small impact on China's economic growth, and in the long run, inflation has a significant negative impact on economic growth, while money supply has a significant positive impact on economic growth.