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The Implementation of Monetary Policy in China: The Interbank Market and Bank Lending

Hongyi Chen, Qianying Chen () and Stefan Gerlach ()
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Hongyi Chen: Hong Kong Institute for Monetary Research

No 262011, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We 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.

Keywords: Monetary Policy Implementation; Regulated Retail Interest Rates; Transmission Mechanism; Window Guidance; Bank Loans; China (search for similar items in EconPapers)
JEL-codes: E42 E52 E58 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-08
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-mon and nep-tra
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