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Revision of the Effectiveness of China’s Sterilization Policies Considering the Role of the Reserve Requirement Ratio Adjustment

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  • Yanzhen Wang
  • Xiumin Li
  • Dong Huang
  • Aihua Wang

Abstract

This paper integrates changes in the reserve requirement ratio with other related monetary policies and estimates the offset and sterilization coefficients to examine the effectiveness of China’s sterilization operations. The results show that China’s sterilization operations have been fairly effective and China has been able to control domestic money supply relatively well despite a limited degree of exchange rate flexibility. The results also indicate that the failure to take changes in reserve requirements ratio into account leads to a substantial underestimate of the effectiveness of China’s sterilization operations, illustrating that this policy is nonnegligible in studying China’s sterilization operations.

Suggested Citation

  • Yanzhen Wang & Xiumin Li & Dong Huang & Aihua Wang, 2021. "Revision of the Effectiveness of China’s Sterilization Policies Considering the Role of the Reserve Requirement Ratio Adjustment," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 57(5), pages 1420-1436, April.
    • Handle: RePEc:mes:emfitr:v:57:y:2021:i:5:p:1420-1436
    DOI: 10.1080/1540496X.2019.1624160
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    Cited by:

    1. Ying Wu, 2023. "Monetary sterilization response to the movements in exchange rates and official net foreign assets: a case of China," Review of Quantitative Finance and Accounting, Springer, vol. 60(2), pages 821-838, February.

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