General monetary policy tools, also known as regular and conventional monetary policy tools, are the traditional three major monetary policy tools, commonly known as the three magic weapons: deposit reserve policy, rediscount policy and open market business . This is the principle of macro-control of the three major monetary policies.
1. Deposit reserve policy.
The deposit reserve policy refers to the central bank's prescribed deposit reserve ratio for deposits in commercial banks and other deposit-taking monetary institutions, and mandatory requirements for commercial banks and other monetary deposit-taking institutions to hand over deposit reserves in accordance with the prescribed ratio; the central bank A policy measure that affects the money supply by adjusting statutory deposit reserves to increase or decrease the excess reserves of commercial banks.
2. Rediscount policy.
Rediscount policy is a means by which the central bank affects the credit scale and market interest rates of commercial banks by raising or lowering the rediscount rate to achieve monetary policy goals.
3. Open market business.
The so-called "Open Market Operation" (Open Market Operation, also known as "Open Market Operation") refers to the central bank's public purchase and sale of securities in the financial market to change the behavior of depository monetary institutions such as commercial banks. Reserves, which in turn affect the money supply and interest rates, are a monetary policy tool to achieve monetary policy goals.
Deposit reserves are funds prepared to limit the credit expansion of financial institutions and ensure the needs of customers to withdraw deposits and liquidate funds. The statutory deposit reserve ratio is the ratio of the deposit reserves that financial institutions pay to the central bank in accordance with regulations to their total deposits. The effect of changes in the deposit reserve ratio on commercial banks is as follows:
When the central bank increases the statutory reserve ratio, the ability of commercial banks to provide loans and create credit decreases. Because the reserve ratio increases, the money multiplier becomes smaller, thereby reducing the ability of the entire commercial banking system to create credit and expand the scale of credit. The result is that society's money supply is tight, the money supply is reduced, interest rates are increased, investment and social Expenditures were reduced accordingly. vice versa.
In 1984, the People's Bank of China began to establish a deposit reserve system. Over the past ten years, it has undergone four adjustments, all of which played a positive role at the time - restraining the economy from overheating, excessive price increases, and excessive currency injection. At present, the central bank's reform direction of the deposit reserve system is to gradually restore the functions of deposit reserve payment and settlement and as a tool for regulating the monetary aggregate, changing its original main function from regulating the monetary aggregate to centralizing funds and adjusting the credit structure. .
Open market business refers to a market where various securities are freely traded and negotiated, and their trading volumes and prices must be publicly displayed. Open market operations refer to activities in which the central bank uses the method of buying and selling securities in the open market to adjust credit scale, loan supply and interest rates to achieve financial control and regulation. It is the most important tool of monetary policy.
The operation method of this business: When the central bank judges that there are too many funds in the society, it will sell bonds and recover part of the funds accordingly; on the contrary, the central bank will buy bonds and directly increase the amount of funds available to financial institutions. . my country's open market business started with foreign exchange operations, and in 1996, the open market business of buying and selling treasury bonds was launched.
Discounting is a bill transfer in which the holder of the bill pays a certain interest to the bank in order to obtain cash before the bill matures. Rediscounting refers to the transfer of undue bills obtained by discounting to the central bank from commercial banks or other financial institutions.
Discounting is a way for commercial banks to provide funds to enterprises, and rediscounting is a way for the central bank to provide funds to commercial banks. Both are based on the transfer of valid instruments - bank acceptance bills. of.
Rediscount is one of the three major monetary policy tools of the central bank (open market operations, rediscount, and deposit reserves). It not only affects the financing costs of commercial banks, limits the credit expansion of commercial banks, and controls currency The total amount of supply can be selectively financed with different types of bills according to the requirements of national industrial policies to promote structural adjustment. Generally speaking, the central bank's rediscount rate has the following characteristics:
A short-term interest rate. Because the loans provided by the central bank are mainly short-term, the term of eligible bills for rediscounting generally does not exceed 3 months, and the maximum term is within 1 year.
An official interest rate. It is stipulated in accordance with the national credit policy and reflects the policy intention of the central bank to a certain extent.
A standard or minimum interest rate. For example, the Bank of England has a variety of different interest rates for discounts and lending, and the reproduced discount rate published by it is the lowest standard.
The main advantage of the rediscount business is that it helps the central bank play the role of the lender of last resort, and it can adjust both the total amount of money supply and the structure of the money supply. The main disadvantage of the rediscount business is that the initiative of the rediscount business lies with commercial banks, not the central bank, which limits the initiative of the central bank; the regulatory effect of the rediscount rate is limited. Raising the rediscount rate during boom times may not be able to curb commercial banks' demand for rediscounts, because commercial banks' profits are higher; lowering the rediscount rate during recessions may not be able to stimulate commercial banks' borrowing needs, because profitability levels at this time are lower.
Moreover, the rediscount rate cannot be adjusted frequently, otherwise the frequent fluctuations in market interest rates will make commercial banks at a loss. In addition, the biggest shortcoming of the rediscount business is that it tends to follow the economic trend. The rise in prices during the boom period increases the amount of rediscount bills and increases the money supply; the fall in prices during the depression period causes the amount of rediscount bills to decrease and the money supply to decrease. . Monetary policy can therefore add fuel to the fire during boom times and add fuel to the fire during busts.
Open market operations have the following advantages: the central bank can use open market operations in a timely manner to buy and sell securities of any size, thereby accurately controlling the reserves and base currency of the banking system to achieve a reasonable level. . Although the way it works is basically the same as the rediscount rate policy and the reserve policy, its effect is more accurate than these two policies and is not affected by the degree of reaction of the banking system. In open market operations, the central bank is always in a proactive position and can implement monetary policy as it wishes. According to Friedman, the central bank's implementation of open market operations is "proactive" rather than "passive waiting".
Open market operations have the following advantages: open market operations have no "announcement effect" and will not cause the public to misunderstand the intentions of monetary policy. Therefore, they will not cause unnecessary chaos in the economy. This allows the central bank to conduct open market operations continuously, flexibly, and without restrictions on time and quantity, without causing chaos in economic operations due to the adaptive adjustment of economic entities. Even if the central bank makes policy mistakes, it can be corrected in a timely manner. . This is something that the rediscount rate policy and reserve policy, which have a strong “notice effect”, cannot do.
Open market operations have the following advantages: when the central bank conducts open market operations, it does not determine the yield or interest rate of other securities, so it will not directly affect the bank's income. In addition, open market operations can be widely used and widely affect social and economic activities. Accordingly, Friedman insisted that the central bank could use open market operations to completely replace the statutory reserve system and conduct rediscount operations.
Open market operations must meet the following three conditions in order to function fully and effectively:
(1) The central bank must have financial institutions powerful enough to intervene and control the entire financial market. Strength;
(2) There must be a developed, complete and national financial market with complete types of securities and reaching a certain scale;
(3) It must be coordinated by other policy tools . Without a reserve requirement system, the money supply cannot be affected by changing the excess reserves of commercial banks.
The biggest shortcoming of open market operations is that countries lacking these three conditions cannot effectively use this policy tool; in addition, its effects are slow, because the impact of the purchase and sale of government bonds on money supply and interest rates takes a certain amount of time to It is slowly transmitted to other financial markets and affects economic operation.
Compared with other monetary policy tools, the deposit reserve policy has the following advantages:
(1) The central bank has complete autonomy and it is the most powerful of the three major monetary policy tools. A means that is easy to implement;
(2) Changes in the deposit reserve ratio have a rapid impact on the money supply. Once determined, all commercial banks and other financial institutions must implement it immediately;
(3) The reserve system treats all commercial banks equally, and all financial institutions are equally affected.
The shortcomings of the deposit reserve policy are:
First, the role is too huge, and its adjustment has a great impact on the entire economy and social psychological expectations, and it is not suitable to be used as a daily policy by the central bank. As a tool to control the money supply, the central bank tends to fix the reserve ratio;
Second, its policy effect is largely affected by the excess deposit reserves of commercial banks. When commercial banks have a large amount of excess reserves and the central bank raises the statutory deposit reserve ratio, commercial banks will use part of the excess reserves as statutory reserves without shrinking the scale of credit. This makes it difficult to achieve the central bank's purpose of reducing the money supply. .
Due to the unbalanced economic and financial development in the eastern, central and western parts of my country, the same monetary policy operations have different or even very different effects in different regions. my country's monetary policy operations have always adopted a nationwide "one game of chess" approach and implemented undifferentiated management. “One size fits all” monetary policy operations rarely take into account differences in the level of economic development between regions. Open market operations, rediscount rate and statutory reserve requirement ratio are the three major tools of my country's monetary policy. The implementation effects of these tools are greatly affected by the differences between the east, central and west.
Open market operations are the central bank’s most commonly used monetary policy tool, and they can affect the base currency through open market operations. In recent years, my country's central bank has invested base currency mainly through open market operations. The ability of commercial banks to use open market operations to inject (out) funds is restricted by the total amount of national debt and asset structure. If a commercial bank's national debt is large and its proportion in the total assets of a commercial bank is also large, its participation The ability to do open market business is strong, otherwise it is weak. There are big differences between commercial banks in the eastern, central and western parts of my country in terms of the size of their treasury bond assets and the proportion of treasury bond assets in their total assets.
Due to the lack of data on the treasury bond assets of state-owned commercial banks in each province, we estimated the treasury bond assets owned by state-owned commercial banks in each province by subtracting the difference between all loans and corporate bonds in their total capital use. By analyzing the state-owned commercial banks in the east, middle and west from 2001 to 2003, The calculation of the proportion of treasury bond assets in their capital utilization can be found: not only the treasury bond assets of state-owned commercial banks in the eastern region account for a higher proportion of the total treasury bond assets of state-owned commercial banks nationwide than in the west and central regions, but also the treasury bonds of state-owned commercial banks in the east The proportion of total assets in its total assets is also much higher than that of central and western banks. The ability of commercial banks in the east to borrow funds through open market operations is stronger than that in the west. Therefore, when the central bank's monetary policy intentions are transmitted through open market operations, the amount of base money obtained by commercial banks in the central and western regions is less than that in the east.
The central bank mainly uses tools such as adjusting the re-lending rate and re-discount rate to influence the scale of commercial banks’ discount loans, thereby realizing the intention of monetary policy. The response of commercial banks to re-lending rate and re-discount rate tools is related to factors such as the profit rate of the real economy that needs loans, liquidity needs, and the opportunity cost of holding excess reserves. Specific to my country's actual situation, the real economic profit rate not only affects the environmental risks faced by commercial banks, but also affects the price of funds (interest rate, discount rate), which undoubtedly affects the response of commercial banks to re-lending interest rates and re-discount rate tools. one of the most important factors. For economic entities, although the supply and demand of funds affect the interest rate and discount rate to a certain extent, in essence, interest is part of the profit created by the real economy, and the level of interest rate is ultimately controlled by the level of profit rate of the real economy. , varies between zero and the average profit rate. In other words, the real economy's ability to withstand bank loan interest rates and discount rates is restricted by profit rates. The real economy with higher profit rates can pay higher capital prices (interest rates, discount rates), that is, it has relatively strong Due to capital demand, the real economy with lower profit margins can only pay lower capital prices. Since commercial banks in various regions face different profit margins in the real economy, under the given conditions that there is almost no difference in the loan interest rate and discount rate level of commercial banks between regions, on the one hand, the real economy with higher profit margins has a stronger ability to digest funds. , the demand for funds is strong. On the other hand, higher profit margins can effectively ensure the safety and profitability of credit funds, reducing the environmental risks faced by commercial banks in lending, so commercial banks are also more willing to lend. Therefore, when the central bank uses the same rediscount and re-lending policy tools, commercial bank loans will grow faster in the eastern region where the profit rate of the real economy is higher; while in the central and western regions where the profit rate of the real economy is lower, the loan growth of commercial banks will be slower. , leading to the "Matthew Effect" in which poorer regions have less funds and richer regions have more funds.
It can be seen from the above discussion that various regions in my country have different responses to the same monetary policy tool. In order to eliminate the different impacts of regional differences on the effects of monetary policy tools and achieve the ideal effect of monetary policy, regional monetary policy tools including open market operations, rediscount rates, and statutory deposit reserve ratios can be operated regionally. In fact, the implementation of differentiated monetary policy operations in different regions is not without precedent abroad. In the early stages of development, the economic development among regions in the United States was also unbalanced. Two of the three major monetary policy tools of the central bank implemented regional operations. The discount rate has always been set by the twelve Federal Reserve Banks based on the economic conditions of their respective jurisdictions. It only needs to be submitted to the Federal Reserve Board in Washington for approval. In fact, in the 1920s, the discount rates set by each reserve bank often differed greatly. Large, it is only with the gradual formation of a homogeneous national financial market that discount rates gradually converge. Although the statutory reserve ratio is uniformly set by the Federal Reserve Board, from the establishment of the Federal Reserve in 1913 until 1972, the statutory reserve ratio set by the Federal Reserve System varied depending on the economic conditions of the regions where the banks were located.