Structural Monetary Policy, Bank Credit and Bank Liquidity—An Empirical Analysis Based on VAR Model

After the outbreak of the international financial crisis, the People’s Bank of China, based on traditional monetary policy tools, launched a series of structural monetary policy tools such as standing lending facility (SLF), medium-term lending facility (MLF), and pledged supplementary lending (PSL) and targeted at liquidity via the commercial banking system. In order to test the credit transmission effect of structured monetary policy, this paper empirically analyzes the relationship between structured monetary policy, bank liquidity and bank credit based on the VAR model. The research shows that the implementation of structured monetary policy reduces the liquidity of commercial banks in the short term and increases in loans to small or micro enterprises and agriculture-related loans, these policies have produced significant short-term effects on credit transmission in steady of long-term effects. Thus, a series of supporting measures are needed to fully exert the effects of structural monetary policy.

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