Research On The Change Of China's Financial Institutions' Excess-Reserve Ratio And Related Impact On Monetary Multiplier

Financial Institution's Excess-Reserve Ratio and the monetary multiplier are closely related. Excess-Reserve Ratio has a direct impact on monetary multiplier stability, which in turn prepares for the efficiency of the regulatory mechanism under monetary policy. Based on relevant theories and research findings, this paper, in terms of theoretical and empirical analysis, discusses the change of China's financial institutions' Excess-Reserve Ratio and its impact on monetary multiplier. Through the study, two findings can be drawn as follows:a) the change of financial institution's Excess-Reserve Ratio are substantially subjected to several factors as Required-Reserve Ratio, interest rate of Excess-Reserve, interest rate for a one-year time deposit, Interbank Offered Rate, GDP growth, Domesic Price Level, the risk status of financial institutions, currency trading and clearing cost, among which the first two ones are especially responsible for the falling Excess-Reserve Ration in recent years, b) Excess-Reserve Ratio Change, in the short term as well as the long term, is one of the deciding factors for the fluctuation of domestic currency. And Excess-Reserve Ratio Change has tremendously affect the stability of monetary multiplier. Thus, it is argued that redesigning the manchanism of reserve ration can help to reduce the flucuation in monetary multiplier, so as to enhance the control ability of Central Bank's Monetary Policy.