Abstract: This paper introduces third party payment into the framework of the formation mechanism of inflation and theoretically discusses how third party payment affects inflation through changing money supply and speed of currency circulation under the new perspective of internet finance by using of the bootstrap method and 2008- 2016 quarter data of China. Empirical findings show that the inflation is significantly affected by utilization rate of internet payment and the event of central bank regulating internet payment; the speed of currency circulation is positively related to inflation, while money multiplier could be ignored; output gap, asset prices, and monetary policy could be ignored. The above conclusions show that we can′t ignore the impact of third party payment on inflation in the context of growing internet finance.

Key words: third party payment, inflation, money supply, speed of currency circulation