| Reserve system is known as the "three magic weapons", is an important monetary policy, which have developed with the banking system. The establishment of the deposit reserve system is designed to ensure the liquidity of the banking system for deposit-taking institutions and ensure banks will not large-scale collapse. As the world’s financial and economic development, the deposit reserve system in the monetary policy tools which occupies an important position, the deposit reserve system become the main form of monetary policy by adjusting the deposit reserve ratio. By adjusting reserve ratio, the central bank adjust monetary and credit aggregates in order to ensure that market interest rates, and the ensure security and stability of financial markets.. However, in recent years, many developed countries have reduced the deposit reserve ratio or even abolish the deposit reserve system. Some people think that the deposit reserve system is outdated and our country should abolish the system,For a long time, the deposit reserve system known as among the "Great Ax", because of its mandatory and other characteristics of the rapid monetary policy tool. In order to maintain the stability of the entire financial system, the central bank hasn’t change the deposit reserve policy. Since the establishment of the reserve system in1984, The People’s Bank had adjusted the deposit reserve ratio only five times until2003.However, in recent years, China is seeing the excess liquidity, in order to hedge the excess liquidity, The People’s Bank had changed the deposit reserve ratio for32times from2007to2011. The reserve policy has become the most commonly used and the most powerful tools of the monetary policy. In the context of excess liquidity, can deposit reserve policy continue to play its monetary policy functions? In the paper, we will analyze the problem and the effectiveness of the deposit reserve policy in the context of the excess liquidity. |
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