Targeted Monetary Policy to Promote Economic Restructuring?——the Case of Directed RRR Cut
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| Title | Targeted Monetary Policy to Promote Economic Restructuring?——the Case of Directed RRR Cut
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| Author | Feng Ming and Wu Ge |
| Organization | National Academy of Economic Strategy, CASS;People’s Bank of China |
| Email | fengm.06@sem.tsinghua.edu.cn；wuge@pbc.gov.cn |
| Key Words | Targeted Monetary Policy; Directed Reserve Requirement Ratio Cut; Interest Rate |
| Abstract | By constructing a commercial bank oligopoly model with differentiated reserve requirement ratios (RRR), we characterize the micro mechanism of directed RRR cut. We find that the directed RRR cut can reduce the lending rate for the targeted sector, while that for the non-targeted sector also decreases. If and only if the interest rate elasticities of demand for loans meet certain conditions, the directed RRR cut can play the role of narrowing the spread between the lending interest rate for the targeted sector and that for the non-targeted sector. The baseline scenario simulation shows that, in other conditions do not change, a one percentage point directed RRR cut for the targeted sector will decrease the lending rates for the targeted sector and the non-targeted sector by 12 basis points and 17 basis points respectively. Meanwhile, the loan amounts for the two sectors will both be increased. |
| Serial Number | WP937 |
| Time | 2015-10-27 |
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