BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
No 26/2015:
Reserve requirements and the bank lending channel in China
Zuzana Fungácová ()
, Riikka Nuutilainen ()
and Laurent Weill ()
Abstract: This paper examines how reserve requirements influence the
transmission of monetary policy through the bank lending channel in China
while also taking into account the role of bank ownership. The
implementation of Chinese monetary policy is characterized by the reliance
on the reserve requirements as a regular policy tool with frequent
adjustments. Using a large dataset of 170 Chinese banks for the period
2004–2013, we analyze the reaction of loan supply to changes in reserve
requirements. We find no evidence of the bank lending channel through the
use of reserve requirements. We observe, nonetheless, that changes in
reserve requirements influence loan growth of banks. The same findings hold
true for other monetary policy instruments. Further, we show that the bank
ownership format influences transmission of monetary policy.
Keywords: Chinese banks; bank lending channel; bank ownership; (follow links to similar papers)
JEL-Codes: E52; G21; P52; (follow links to similar papers)
33 pages, September 21, 2015
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