Dual-track Interest Rates and the Conduct of Monetary Policy in China
研究中国利率双轨制下货币政策如何传导，发现市场利率对基准存款利率最敏感，对准备金率反应显著，对公开市场操作不敏感，并用数据验证了理论模型。
China has a dual-track interest-rate system:bank deposit and lending rates are regulated while money and bond rates are market-determined.The central bank also imposes an indicative target,which may not be binding at all times,for total credit in the banking system.We develop and calibrate a theoretical model to illustrate the conduct of monetary policy within the framework of dual-track interest rates and a juxtaposition of price- and quantity-based policy instruments.We model the transmission of monetary policy instruments to market interest rates,which,together with the quantitative credit target in the banking system,ultimately are the means by which monetary policy affects the real economy.The model shows that market interest rates are most sensitive to changes in the benchmark deposit interest rates,significantly responsive to changes in the reserve requirements,but not particularly reactive to open market operations.These theoretical results are verified and supported by both linear and GARCH models using daily money and bond market data.Overall,the findings of this study help us to understand why the central bank conducts monetary policy in China the way it does:distortions caused by price-based instruments have to be corrected by quantity-based instruments.