A Study On The Impact Of Treasury Cash Management On Monetary Policy

Government cash management is an important content of modern financial management. In China, establishing modern financial treasury systems accords with the development rule of the market economy. At the same time, it also ensures budget implementation and fiscal efficiency improving. The basis and core of the financial treasury system is the treasury single account and centralized treasury payment system, which was carried out in the year of 2001 in China. When pushing forward of the reform of the centralized treasury payment, a large number of the government cash gathers to treasury single account at the central bank. This situation requires to pay urgently attention to “Time Value” and the opportunity cost of the fund and promote the government cash management.Government cash management means a large number of funds will flow among the central bank, commercial bank, enterprises and individuals. It inevitably causes impact on financial environment, such as money supply, interest rate and monetary market, which affects the implement of the monetary policy of central bank. As one kind of financial policy, government cash management is an important method to regulate the economy in a country. One of its goals is to coordinate with monetary policy and promote an effective implement to the economy. Therefore researching the influence and coordination between government cash management and monetary policy has a significant meaning on accomplishing the macroeconomic goal.Firstly this essay presents the concept, connotation, goal and three operating modes of the government cash management. Meanwhile, introduce the process of treasury management system reform and the current implementing situation of government cash management in China. Secondly, after contrasting the practice in Britain, America, Australian and other countries’ government cash management operation, analyze and summarize each country’s management institution, target balance management, investment and financing coordination and the collaboration mechanism between the department of finance and the central bank. What’s more, on the basis of the brief summary about monetary policy theory, the author has a theoretical analysis of three different government cash managements. Different operating modes will have different influences on monetary policy and monetary policy itself refers to multiple variables and transmission channels. As a result, what kind of consequences the government cash management has towards monetary policy is up to the current situation of government cash management and it needs to be discussed by an empirical method. So next step is through the measurement methods, such as co-integration test, error correction model, Granger causality test, analysis of variance and impulse response function, to have an empirical analysis of the government cash management’s impact on the money supply, monetary market transaction and trading rate. Empirical results show that there are long term regulations between the government cash and money supply, monetary market transaction and trading rate. Thus in the long run, we have to regulate government cash management and monetary policy in practice. At last, according to the specific situation of China, propose that in the process of exploring modern financial treasury management system, government cash management and monetary policy should mutually coordinate and cooperate in the aspects like organization establishment, target balance management, specific operation and so on.