A Study On Regulation Of Excess Liquidity By Total Amount Of Adjustment Instruments In China

Since reform, macroeconomic performance has appeared in the process of excess liquidity and the general rise in prices of the phenomenon in China. In this situation, in order to maintain economic stability and healthy development, government adjusted the excess liquidity in many policies. Amount of adjustment instruments are the very important policies to solve the excess liquidity in China. This essay will discuss about theoretical basis and practical choices of regulating amount of adjustment instruments, through analysis of the excess liquidity and its performance.Base on this, the article is divided into five parts; the first part is the explanation of the previous research on liquidity and the amount of adjustment instruments and methods used in this paper. The second part described the total amount of liquidity and amount of adjustment instruments in the regulation of the methods, and to explain the regulating mechanism of the amount of adjustment instruments and methods. The third section reviews changes of liquidity since China's reform, and the effect of the amount of adjustment instruments. The fourth part is evaluating amount of adjustment instruments and liquidity by the application of econometrics, and chooses the more effectively amount of adjustment instruments to solve the excess liquidity in China. Part V for the above conclusions on the future regulation of the total use of tools to make recommendationsThe paper selects the six groups of monthly data during 1984 to 2009 to make an empirical analyst and research that is money supply M2, bond issuance, one-year deposit rate, deposit reserve rate, the RMB against the U.S. dollar 6 of the annual data. The empirical results show that the one-year deposit rate, deposit reserve rate, the RMB exchange rate against the U.S. dollar amount of adjustment instruments for the governance situation of excess liquidity more significant, the amount of bonds issued for the management of excess liquidity effect is not significant. Then based on empirical results, using monetary policy tools to solve the problem of excess liquidity, supporting by appropriate recovery of treasury bonds market liquidity, greater exchange rate flexibility and interest rate policy combined with the application.