A Study On The Effectiveness Of The Reserve Requirements Policy In China

America established the reserve requirements policy in1935;any other countries also established the reserve requirements policy in a few years later. In recent years, these countries seldom use this police. Some countries set the required deposit reserve ratio at lower level; some other countries even abolished this policy. The deposit reserve policy showed obvious decline trend in foreign countries. Different from the above, China has changed the deposit reserve ratio up to36times from2006to present. The reserve policy played a more and more important role in China’s monetary policy. So the problem as why China used the reserve requirements policy frequently, what’s the effect of the implementation, what’s the restrict factors, how to improve the effectiveness of the reserve requirements policy, have a high researched value.Based on this, the paper gives a study on the effectiveness of the reserve requirements policy in China. The main idea is that:learn research methods and the effectiveness criteria by combing scholars’ researches on the effectiveness of the reserve requirements policy, further explore the connotation of the policy effectiveness. In China, the standards of the reserve policy effectiveness including the economic environment that meet the related conditions and the influence of loan credit and money supply. Firstly, this paper confirm that our economic environment meet the related conditions of effectiveness by comparing the foreign countries. Secondly, this paper confirms that the deposit reserve policy can affect loan credit and money supply by analyzing the effect of the implementation. But the effectiveness of China’s reserve policy is also affected by foreign exchange, deposit size, excess reserve ratio and other factors. Finally, through empirical analysis, establish two sets of VAR models to examine that:(1) In considering the scale of deposit and the excess reserve ratio factors, the influence of the deposit reserve policy on loan credit.(2) In considering the funds outstanding for foreign exchange factor, the influence of the deposit reserve policy on money supply. The empirical results that in considering these strict factors, the reserve requirements policy can influence loan credit and money supply effectively. To further enhance the effectiveness of the reserve policy in China, the paper put forward some suggestion such as improve the reserve requirements and improve the external environment.