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Academic Journal of Business & Management, 2021, 3(12); doi: 10.25236/AJBM.2021.031204.

Analysis of the impact of China's deposit reserve policy on the liquidity of local legal person financial institutions

Author(s)

Feng Shenghua

Corresponding Author:
Feng Shenghua
Affiliation(s)

Shenwan Hongyuan Securities Co., Ltd Hefei, China

Abstract

The deposit reserve policy is a monetary policy tool established under the central banking system.Since the People's Bank of China performed its duties as the Central Bank in the 1980s, China's deposit reserve system has been established and gradually improved.At present, China has basically formed a "three files and two excellent" deposit reserve framework.As one of the three major monetary policy tools of the central bank, the deposit reserve policy affects the liquidity of financial institutions and the banking system through the excess reserve ratio and the monetary multiplier effect, and the liquidity of the banking system is related to the financial stability of a country and the prevention of systemic financial risks.Therefore, it is important to study the impact of deposit reserve policy on liquidity. In this paper, the monthly data of 16 legal person financial institutions in a certain region from January 2017 to May 2021 were selected as the study sample, To carry out empirical research on the impact of China's deposit reserve ratio changes on the liquidity of financial institutions in a certain region, And the capital adequacy ratio, interbank lending rate and other indicators are introduced as internal and external influencing factors, The results show that the legal deposit reserve ratio has a certain impact on the liquidity of financial institutions, However, different types of financial institutions and different influencing factors make the impact of the legal deposit reserve ratio on liquidity different, And the impact of the legal deposit reserve ratio on liquidity has a certain time lag.Through carrying out empirical research, this paper hopes to further enrich the theoretical achievements in the field of deposit reserve and liquidity, and provide a reasonable basis for the central bank to better play the market regulation role of deposit reserve policy.

Keywords

deposit reserve policy; liquidity; legal person financial institution

Cite This Paper

Feng Shenghua. Analysis of the impact of China's deposit reserve policy on the liquidity of local legal person financial institutions. Academic Journal of Business & Management (2021) Vol. 3, Issue 12: 14-20. https://doi.org/10.25236/AJBM.2021.031204.

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