The Empirical Analysis Of The Impact Of Monetary Policy On Commercial Bank Liquidity In China

This paper will study the impact of monetary policy on commercial bank liquidity.Our country has three monetary policy tools: the deposit reserve ratio, open marketoperations and rediscount. The deposit reserve ratio is the most ferocious monetarypolicy tool. The liquidity is essential for commercial banks, profitability and risk can beachieved only achieve liquidity. Monetary policy can affect the liquidity of commercialbanks by influencing the commercial bank money creation function and the credit scale.The study of the monetary policy on regulating liquidity of commercial banks and thechoice of monetary policy tools to strengthen liquidity management is very important.Therefore, this paper will study the impact of monetary policy on the liquidity ofcommercial banks.This paper will analysis the affection of monetary policy tools on the liquidity ofcommercial banks in theory, and the current situation of Chinese commercial banks’liquidity. The results are as follows: Central banks can regulate commercial banks’liquidity by adjusting monetary policy tools to regulate available funds of financialinstitutions, and affecting the funding of financial institutions to change the supply anddemand relationship of money. After the development of thirty years, China’s monetarypolicy system is gradually improved, the instruments of macro-control policy graduallyenriched and innovative. It maintains an adequate level of liquidity in general.The core of this paper is to study the impact of monetary policy on commercial bankliquidity, use unit root test, co-integration test and impulse response analysis and othermethods by constructing a vector auto regression model. The results are as follows:Statutory deposit reserve ratio has the strongest negative effect and the longest durationof action to commercial banks’ liquidity. Issuance of central bank bills has a strongpositive effect and its short-term impact is relatively large to the liquidity of commercialbanks, and its regulation of short-term liquidity effect is significant. Open marketoperation has a negative and small effect to commercial banks’ liquidity, but theduration is longer. So the regulation of commercial banks’ liquidity should be areasonable mix of monetary policy tools based on the actual situation according to theactual situation, so that monetary policy can be more flexible and stable to regulatecommercial banks’ liquidity.