Analysis Of The Reserve System And Policy Effects

Deposit reserves, rediscount and open-market operation are generally known as the three most effective instruments of monetary policy. Of these as the earliest -used one, the system and function of deposit reserves are not always constant, but have been deducing and being exerted gradually with the development of banking system, from the original function of keeping liquidity in banking until becoming one of the instruments of monetary policy. The central bank raises or lessens the compulsory deposit from financial firms handed in the central bank by lifting or falling the deposit reserves rate which serves as a policy instrument to control credit and money supply, leading to the change of money multiplier, and therefore fulfilling the purpose of enlarging or contracting credit and money supply. In recent years, there have been noticeable disputes among the field of theoretical research, suggesting that the role of deposit reserves as a monetary policy instrument is fading continuously, as a result, some western industrialized countries either canceled the deposit reserves system or replace it with some other instruments to regulate the amount of money. China, however, uses the so- called "a giant axe" instrument time and time again. For these reasons mentioned above, researching further the issue of interaction and resulting policy effects of deposit reserves in our country will definitely facilitate to deepen the perception of many realistic problems by people in the process of China monetary policy restructure, and also understand those systematic and institutional factors affecting how deposit reserves functions, therefore giving a direction of our reform of deposit reserves system.This essay arranges the systematical development of deposit reserves as its background, analyzes the policy effects of deposit reserves in different frames, and uses a large number of numbers and facts to make the arguments clearer. Paying attention to the correlation between theory and practices is its another feature. This essay firstly reviews the related basic knowledge and the history of deposit reserves, makes an international comparison among different deposit reserves systems, and then analyzes with relation to the actual situation in China, finally puts forward to policy suggestions.This essay is divided into the four parts:Chapter one, Introducing briefly the development, history and functional principle of deposit reserves system. Under the different monetary policy targets, deposit reserves serves different functions, naturally, with the development of banking, its system also makes a great change.Chapter two, From the four angles of its functions, its level and adjusting frequency, whether to pay interest, calculating and holding periods, making a further research on the deposit reserves systems in both western industrialized countries and emerging market-oriented economies, and then generalizing their respective features and development trends, finally, comparing the instinct disparity between the systems home and abroad .Chapter three, Firstly introducing its change experienced and respective adjusting since the deposit reserves system was set up in China, and then analyzing in detail the functional effects of the deposit reserves rate adjusting in China during the different phases, finally making an empirical conclusion about the current factors affecting the functional effects of our deposit reserves system .Chapter four, Under the facts that most countries in the world undisciplined or cancelled the demand for deposit reserves, formulating the meaning and reasons of keeping alive our deposit reserves system, moreover giving the feasible suggestions that we should strengthen the policy effects of our deposit reserves system from the angles of interest-paying arrangement and adjusting frequency.