Commercial Bank Asset And Liability Structure Of Money Supply

Combining the domestic and foreign related studies with the monetary policy transmission mechanism and its present operations in China, we have demonstrated the commercial banks' balance sheet structures' influence on the money supply. Based on our summary of the prevailing monetary theories,endogenous money and mixed character money supply theory and their significance, we find that commercial banks have not transmitted the policy signal of the central bank's money supply on the basis of a strict multiple effect in the long or the short term. With the analysis of the commercial banks' assets, liabilities' data and it's changing trend in China and the United States, we has explained the process and means of commercial banks' balance sheet structure's influence on money supply.Empirical research has thus been carried out with related quarterly data from 1994 to 2003 in China with the method of sub-analysis step by step and then syndic analysis. Firstly, the relationship among base money, money multiplier and money supply and the long-term contribution and short-term impact which base money and money multiplier added to money supply have been studied; Secondly, the relationship between base money and the channel of it's issue and the effect which some factors posed on money multiplier have been analyzed . on the basis of that, the long and short term impact level added by central bank, the commercialbanks and the public have been concluded. The empirical evidence shows the main factor effecting base money is the change of the commercial banks' reloan and rediscount before 2002, and the main factor effecting money multiplier is the change of commercial banks' extra reserve rates from 1994 to 2003. At last, the paper builds cointegration models and error correction models between the commercial banks' balance sheet structure and money supply by using the Johansen reduced rank regression approach and vector autoregressive method. Through the model we have examined the short-term and the long-term effect on the money supply brought by the commercial banks' balance sheet structure .