The Effect Of China's Legal Deposit Reserve Rate Control Analysis

Western countries do not use this tool and our country frequently uses the statutory reserve as macroeconomic control means. And the author analyzes the results of this implementation.and the author also explored the reason for this utility. Finally, this dissertation makes some recommendations on how to improve the effectiveness of the statutory reserve requirement policy.This article is divided into seven sections. The first part is the introduction, including the research background and significance, the effectiveness of monetary policy in our country and overseas, the literature review about utility analysis of deposit fund system used in this article, the research framework and research method is also mentioned. The second part is divided into the theoretical overview and general analysis of the reserve system, including the origin and history of the statutory deposit reserve system in Western countries, the analysis of the effectiveness of reserve system transmission mechanism, and the effective analysis of the factors that affect the reserve system. The third part comes to explain the dissertation, it reviewed the history of the reserve system in China since1984, the previous adjustment phase of the characteristics and description of the phenomenon; analysis the wantonly use of Chinese reserve system and economic background and conditions. The fourth part selects the main macroeconomic and financial market data from2007to2011, in order to adjust the broad money supply M2and bank loans from financial institutions in a short time, use the consumer price index (CPI) adjustment and analysis of GDP data to determine the statutory deposit reserve ratio increase or decrease, as well as the differences with the expected results. The fifth part focuses on the effect of adjusting the statutory deposit reserve ratio and the reasons for the limited effect analysis. The sixth section presents the author’s policy recommendations. Part seven is the summary of the full text.The author’s policy recommendations for the reform of China’s deposit reserve interest-bearing system, the ways for the deposit reserve provision, improvement of the reserve deposit oversight mechanisms, promoting the interest rate market, the establishment of the RMB exchange rate system, strictly control the inflow of hot money, as well as accelerate the development of other monetary policy tools.