The Implementation of Monetary Policy in China: The Interbank Market and Bank Lending
AbstractWe analyze the impact of monetary policy instruments on interbank lending rates and retail bank lending in China using an extended version of the model of Porter and Xu (2009). Unlike the central banks of advanced economies, the People's Bank of China uses changes in the required reserve ratios and open market operations to influence liquidity in money markets and adjusts the regulated deposit and lending rates and loan targets to intervene in the retail deposit and lending market. These interventions prevent the interbank lending rate from signalling monetary policy stance and transmitting the effect of policy to the growth of bank loans.
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Bibliographic InfoPaper provided by Hong Kong Institute for Monetary Research in its series Working Papers with number 262011.
Length: 38 pages
Date of creation: Aug 2011
Date of revision:
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Monetary Policy Implementation; Regulated Retail Interest Rates; Transmission Mechanism; Window Guidance; Bank Loans; China;
Find related papers by JEL classification:
- E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-16 (All new papers)
- NEP-BAN-2011-09-16 (Banking)
- NEP-CBA-2011-09-16 (Central Banking)
- NEP-MAC-2011-09-16 (Macroeconomics)
- NEP-MON-2011-09-16 (Monetary Economics)
- NEP-TRA-2011-09-16 (Transition Economics)
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- Sun, Rongrong, 2013.
"Does monetary policy matter in China? A narrative approach,"
China Economic Review, Elsevier,
Elsevier, vol. 26(C), pages 56-74.
- Sun, Rongrong, 2012. "Does Monetary Policy Matter in China? A Narrative Approach," MPRA Paper 45023, University Library of Munich, Germany.
- Fernald, John G. & Spiegel, Mark M. & Swanson, Eric T., 2014. "Monetary policy effectiveness in China: evidence from a FAVAR model," Working Paper Series, Federal Reserve Bank of San Francisco 2014-7, Federal Reserve Bank of San Francisco.
- Hou, Xiaohui & Wang, Qing, 2013. "Implications of banking marketization for the lending channel of monetary policy transmission: Evidence from China," Journal of Macroeconomics, Elsevier, Elsevier, vol. 38(PB), pages 442-451.
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