Analysis The Effectiveness Of The Central Bank Bill As Monetary Sterilisation Tool

2001China joined the world trade organization, the WTO, to promote further to speed up thepace of reform and opening-up, to promote the development of China’s economy continued to high speedand the national economic strength greatly increased.After entry into the WTO, international trade andstrengthening cooperation, such as export manufacturing various types of enterprises more and more,China’s economic situation is good, has attracted more and more foreign businesses in the world to come toChina for direct investment, balance of payments from deficit to surplus, and from the current-accountsurplus to the situation of current and capital accounts, double surplus.The expansion of the foreign trade,international capital and renminbi transactions between frequently, it is to the people’s bank of China tomaintain exchange rate stability, to perform the duties of a country’s central bank, put forward the higherrequest.Successful implementation of1994, China’s exchange rate system, implemented in1996RMBunder current account convertibility, it is a sign of China’s foreign exchange system into a new stage.Inorder to keep the RMB exchange rate on a stable and reasonable level, to ensure the stability of thedomestic money supply, the people’s bank of China began on a large scale, long time of foreign exchangeintervention and corresponding sterilisation, maintain the internal and external economicequilibrium.Began in2005on the basis of market supply and demand, reference to a basket of currencies,managed floating exchange rate system, the management of foreign exchange shall practise a system offorced out.Under these two kinds of specific system, China’s foreign exchange reserves continue to increase,the end of1999to June2013, the foreign exchange reserves by$154.675billion to$3.496686trillion.Increase in foreign exchange reserves and the monetary base on the excess liquidity problem, at thesame time, also contributed to the expected appreciation of the yuan, to maintain relatively stable currency,to prevent inflation, and maintaining moderate economic growth to a certain extent, the people’s bank ofChina in recent years, increasing foreign exchange intervention, strengthen sterilisation.By issuing centralbank bills to commercial Banks in the hands of the extra money, limiting further credits, and tax increaseRMB special account, in the aspect of controlling the money supply to take positive and effectiveresults.Later, as the surge in foreign-exchange reserves and the strength increasing of sterilisation, appear the situation of unbalanced economy in our country.Compared with other monetary policy tools, openmarket operations in regulating the money supply and liquidity in the market, more initiative and flexibility,it is easier to control and operation, is that countries like to use the central bank’s monetary policytools.Treasury bonds and central bank bills are in by means of open market operations, the commonoperating tools.In our country, the Treasury bond market development degree is not high, a single varietystructure, as the central bank’s monetary policy tools, obviously inadequate.On September24,2002thepeople’s bank of China will not expire193.75billion yuan are the buyback varieties into with the deadlineof central bank bills, central bank bills to become a new type of monetary policy to adjust short-term tools,is frequently used in the currency market, and try to innovate constantly develop new varieties, has played apositive role in macroeconomic regulation and control, become routine operating tools.Central bank bills not only strong liquidity, but also in terms of macroeconomic regulation and control, westill have some elasticity.Overall, can absorb part of the available funds of commercial Banks, to controlliquidity;At the micro level, various commercial bank can according to oneself circumstance of trade bill,maintain liquidity.Through the issuance of central bank bills, the central bank can flexibly adjust thestructure of its liabilities, also can control the loanable funds of commercial Banks.In2006China’s foreignexchange reserves ranked first, such a huge foreign exchange reserves, to the management of the economyaffairs of the people’s bank of China has brought great pressure.In2007in the wake of the internationalfinancial crisis, the global economic slowdown, China’s foreign exchange reserves growth is slowing.By2013, the national economy began to slow recovery, while China during this period has been to keep themodest economic growth, domestic prices are relatively stable, presents a modest renminbi appreciationtrend.During this time, as a short-term sterilisation tools how played a role of central bank bills,sterilization effect how?This article by reviewing related literature at home and abroad research, combinedwith the practical situation of our country, using VAR model, Granger causality test and other econometricmethods to make a empirical analysis of the effectiveness of the central bank bills sterilisation andinspection, and main conclusions.