Reforms in China’s Monetary Policy Reforms in China’s Monetary
V. Central Bank Liabilities Spectrum
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| V. Central Bank Liabilities Spectrum
Usually the central bank liabilities include many items (see Figure 1.4 ), and if we rank such items and certain types of central bank liabilities used by some countries as monetary policy instruments according to the level of liquidity and the degree of marketization, a central bank liabilities spectrum similar to the optical spectrum will be established. Under this spectrum, the correla- tions among all types of central bank liabilities instruments can be clearly determined. See Figure 1.6 . In China, repo is conducted through pledged transaction, which is the so- called pledged repo (see Figure 1.6 ). When the central bank conducts repo, such a transaction does not show up on the balance sheet as a reduction in bonds on the assets side or a reduction in excess reserves on the liabilities side but instead shows up as an increase in repo liabilities on the liabilities side and a reduction in excess reserves on the liabilities side, which is similar to the issuance of central bank bonds. However, the shortcoming of pledged repo is that the central bank has to pledge its bonds. Since the central bank has no credit risk, the bonds pledged by the central bank will not enhance the credit Monetary Theory ● 59 rating of the repo. Moreover, the pledged repo provides no liquidity, and the pledged repo held by commercial banks must be redeemed for cash upon maturuation. Therefore such repo has high interest rate on issuance, and in particular, in the case of massive issuance, the interest rate for pledged repo will increase significantly. Hence, pledged repo is not as good as central bank bonds in terms of marketization and liquidity of issuance, and bonds need to be pledged. Central bank bonds are therefore superior in all respects. The central bank may also issue deposit receipts or special central bank certificates of deposit via administrative means. Figure 1.6 differentiates between negotiable central bank certificate of deposit receipts and nonnego- tiable central bank deposit receipts to fully reflect the liabilities of the central bank. Because these two kinds of receipts are not issued by market-based means, and the quantities purchased by commercial banks are administra- tively determined and cannot reflect their demand for reserves, the allocation of reserves cannot be matched to the level of demand among commercial banks, which is a disadvantage in comparison with central bank bonds issued by auction. Hence, among central bank liabilities other than required reserves, excess reserves, and cash, central bank bills are the instruments with the highest degree of marketization, best liquidity, and lowest cost. Therefore, as long as the liabilities instruments of the central bank deviate from the origin of required reserves in the central bank liabilities spectrum, they will certainly develop into another extreme of central bank bonds. Central bank bonds are the superior form of central bank market-based liabilities. Based on the inter- national trend toward simplification of the central bank balance sheet, only Required Reserves Non-negotiable Central Bank Deposit Receipts Pledged Repo Negotiable Central Bank Deposit Receipts Central Bank Bonds Cash and Excess Reserves Liquidity Marketization tải về 1.53 Mb. Chia sẻ với bạn bè của bạn:
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