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Some Preliminary Evidence on China’s New Monetary Policy Tool: The Standing Lending Facility

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  • Liu Kerry

    (The China Studies Centre, University of Sydney, Sydney, Australia)

Abstract

In 2013, China’s central bank introduced the standing lending facility to manage the volatility of interbank market rates. This study is the first of its kind in the academic literature by examining the effect of this new monetary policy tool. Based on monthly data between December 2015–November 2018, the empirical results show that the standing lending facility operations can significantly reduce the volatility of overnight SHIBOR, an important policy rate in the Chinese financial markets.

Suggested Citation

  • Liu Kerry, 2019. "Some Preliminary Evidence on China’s New Monetary Policy Tool: The Standing Lending Facility," Review of Economics, De Gruyter, vol. 70(2), pages 137-155, August.
    • Handle: RePEc:lus:reveco:v:70:y:2019:i:2:p:137-155:n:2
    DOI: 10.1515/roe-2019-0013
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    References listed on IDEAS

    as
    1. Craig Furfine, 2003. "Standing Facilities and Interbank Borrowing: Evidence from the Federal Reserve's New Discount Window," International Finance, Wiley Blackwell, vol. 6(3), pages 329-347, November.
    2. Marvin Goodfriend & Robert G. King, 1988. "Financial deregulation, monetary policy, and central banking," Economic Review, Federal Reserve Bank of Richmond, vol. 74(May), pages 3-22.
    3. repec:bla:intfin:v:6:y:2003:i:3:p:329-47 is not listed on IDEAS
    4. Stavros Peristiani, 1998. "The Growing Reluctance To Borrow At The Discount Window: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 611-620, November.
    5. Kerry Liu, 2017. "China's Interest Rate Pass-through to Commercial Banks Before and After Interest Rate Liberalisation," Economic Affairs, Wiley Blackwell, vol. 37(2), pages 279-287, June.
    6. Bindseil, Ulrich & Jabłecki, Juliusz, 2011. "The optimal width of the central bank standing facilities corridor and banks' day-to-day liquidity management," Working Paper Series 1350, European Central Bank.
    7. Nathan Porter & TengTeng Xu, 2016. "Money-Market Rates and Retail Interest Regulation in China: The Disconnect between Interbank and Retail Credit Conditions," International Journal of Central Banking, International Journal of Central Banking, vol. 12(1), pages 143-198, March.
    8. Yucheng Cai & Hiroyuki Taguchi, 2015. "Monetary policy rule under financial deregulation in China," Economics Bulletin, AccessEcon, vol. 35(1), pages 122-132.
    9. Huberto M. Ennis & John A. Weinberg, 2016. "The Role of Central Bank Lending in the Conduct of Monetary Policy," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue December.
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    Cited by:

    1. Makram El-Shagi & Yishuo Ma, 2024. "New Evidence on the PBoC's Reaction Function," CFDS Discussion Paper Series 2024/5, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.

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    More about this item

    Keywords

    People’s Bank of China; standing lending facility; volatility; SHIBOR; policy rate;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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