 Interbank liquidity transmission and the credit channel of monetary policy in ChinaHai Jiang, Chao Yuan and Zhitao Lin Research in International Business and Finance, 2023, vol. 66, issue C Abstract: This paper investigates the liquidity transmission of traditional and structural monetary policy instruments in the interbank market and their effects on bank credit growth based on 107 banks from 2005Q4 to 2020Q4 in China. We find that the credit channel of monetary policy differs across banks with heterogeneous liquidity acquisitions. The liquidity released by open market operations (OMOs) cannot stimulate credit growth, but increases the net interbank assets of primary banks and reduces those of non-primary banks. The reduction of the required reserve ratio (RRR) increases the net interbank assets of non-primary banks and stimulates non-primary banks’ credit growth. Furthermore, a higher interbank financing ratio reduces the credit channel of RRR reduction in non-primary banks. In addition, medium- and small-sized banks would increase credit growth and reduce reliance on interbank financing, as the structural monetary policy instrument of medium-term lending facilities (MLFs) plays a growing role post-reform. Keywords: Monetary policy; Liquidity transmission; Interbank behavior; Credit channel of monetary policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:66:y:2023:i:c:s0275531923001423 DOI: 10.1016/j.ribaf.2023.102016 Access Statistics for this article Research in International Business and Finance is currently edited by T. Lagoarde Segot More articles in Research in International Business and Finance from Elsevier |
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