Reforms in China’s Monetary Policy Reforms in China’s Monetary
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| Monetary Policy: A Frontbencher’s Perspective is a collection of my works that
includes 20 papers as a representation of my points of view. I have started to do research on the creation of money since when I was a student. In 1995, I proposed my view of credit money creation in my mas- ter degree paper “China’s Monetary Policy Transition Mechanism,” and fur- ther developed the points into the credit money theory in 2001. The critical points in the theory include: credit money is in nature a debt/credit relation between the banking sector and the private nonbanking sector. Banks expand their assets through lending, which subsequently create deposits. The central banks expand their assets through the creation of base money and support and restrain the money creation of banks through base money management. There are three major constraints: clearing constraint, cash constraint, and required reserves constraint. The idea that deposits are created from loans is different from the con- ventional theory of money creation and our intuition. But it is consistent with the real-world experience, and the framework is neater. As Mckinnon suggested, “Your thinking of a loan multiplier in parallel with the traditional money multiplier is quite neat.” 1 But in reality it is very slow and difficult for people to change and update their mind. In China, the important instrumen- tal indicator, loan-to-deposit ratio, which requires that an outstanding loan not exceed 75 percent of the deposit, is based precisely on the conventional theory of money creation. According to the theory of credit money, banks are able to create loans without the constraints of deposits. Actually every 2 ● Reforms in China’s Monetary Policy single dime of deposit comes from assets expansion of banks. Given that tải về 1.53 Mb. Chia sẻ với bạn bè của bạn:
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