Involuntary Excess Reserves, the Reserve Requirements and Credit Rationing in China

Vu Hong Thai Nguyen, Agyenim Boateng, David Newton

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Using a sample of 95 banks that covers the period 2000–2011, this article examines Chinese banks’ credit lending behaviour in response to the changes in the reserve requirement ratio in the presence of involuntary excess reserves (IERs) in the banking system. The study finds that Chinese banks with positive IERs one period after a reserve requirement shock experience a significantly increased credit supply in response to an increase in reserve requirement ratio. However, the reserve requirements have no significant impact on the credit supply in Chinese banks that have negative IERs one period after a reserve requirement shock. This article sheds lights on the effectiveness of Chinese monetary policy, which uses reserve requirements as the primary tool to sterilize excess liquidity and restrain credit expansion.
Original languageEnglish
Pages (from-to)1424-1437
Number of pages15
JournalApplied Economics
Volume47
Issue number14
DOIs
Publication statusPublished - 7 Jan 2015

Fingerprint

Credit rationing
Reserve requirements
China
Credit supply
Lending
Excess liquidity
Bank credit
Banking system
Monetary policy
Credit

Cite this

Involuntary Excess Reserves, the Reserve Requirements and Credit Rationing in China. / Nguyen, Vu Hong Thai; Boateng, Agyenim; Newton, David.

In: Applied Economics, Vol. 47, No. 14, 07.01.2015, p. 1424-1437.

Research output: Contribution to journalArticle

Nguyen, Vu Hong Thai ; Boateng, Agyenim ; Newton, David. / Involuntary Excess Reserves, the Reserve Requirements and Credit Rationing in China. In: Applied Economics. 2015 ; Vol. 47, No. 14. pp. 1424-1437.
@article{05534ce92bb94a1a8bb74aa76542a56a,
title = "Involuntary Excess Reserves, the Reserve Requirements and Credit Rationing in China",
abstract = "Using a sample of 95 banks that covers the period 2000–2011, this article examines Chinese banks’ credit lending behaviour in response to the changes in the reserve requirement ratio in the presence of involuntary excess reserves (IERs) in the banking system. The study finds that Chinese banks with positive IERs one period after a reserve requirement shock experience a significantly increased credit supply in response to an increase in reserve requirement ratio. However, the reserve requirements have no significant impact on the credit supply in Chinese banks that have negative IERs one period after a reserve requirement shock. This article sheds lights on the effectiveness of Chinese monetary policy, which uses reserve requirements as the primary tool to sterilize excess liquidity and restrain credit expansion.",
author = "Nguyen, {Vu Hong Thai} and Agyenim Boateng and David Newton",
year = "2015",
month = "1",
day = "7",
doi = "10.1080/00036846.2014.995362",
language = "English",
volume = "47",
pages = "1424--1437",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",
number = "14",

}

TY - JOUR

T1 - Involuntary Excess Reserves, the Reserve Requirements and Credit Rationing in China

AU - Nguyen, Vu Hong Thai

AU - Boateng, Agyenim

AU - Newton, David

PY - 2015/1/7

Y1 - 2015/1/7

N2 - Using a sample of 95 banks that covers the period 2000–2011, this article examines Chinese banks’ credit lending behaviour in response to the changes in the reserve requirement ratio in the presence of involuntary excess reserves (IERs) in the banking system. The study finds that Chinese banks with positive IERs one period after a reserve requirement shock experience a significantly increased credit supply in response to an increase in reserve requirement ratio. However, the reserve requirements have no significant impact on the credit supply in Chinese banks that have negative IERs one period after a reserve requirement shock. This article sheds lights on the effectiveness of Chinese monetary policy, which uses reserve requirements as the primary tool to sterilize excess liquidity and restrain credit expansion.

AB - Using a sample of 95 banks that covers the period 2000–2011, this article examines Chinese banks’ credit lending behaviour in response to the changes in the reserve requirement ratio in the presence of involuntary excess reserves (IERs) in the banking system. The study finds that Chinese banks with positive IERs one period after a reserve requirement shock experience a significantly increased credit supply in response to an increase in reserve requirement ratio. However, the reserve requirements have no significant impact on the credit supply in Chinese banks that have negative IERs one period after a reserve requirement shock. This article sheds lights on the effectiveness of Chinese monetary policy, which uses reserve requirements as the primary tool to sterilize excess liquidity and restrain credit expansion.

UR - https://doi.org/10.1080/00036846.2014.995362

U2 - 10.1080/00036846.2014.995362

DO - 10.1080/00036846.2014.995362

M3 - Article

VL - 47

SP - 1424

EP - 1437

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 14

ER -