Abstract: Considering the impact of international capital flows, this paper uses the nonlinear threshold vector autoregression model to analyze reserve ratio policy effects from the perspective of macro-prudential policy. The empirical results show that reserve ratio under certain conditions can be used as macro-prudential tools. (1) When the excess reserve ratio is high, the reserve ratio policy is effective. (2) When net input decreases or is small, reserve ratio policy is effective. (3) Reserve ratio policy isn’t effective with lower growth rate of funds outstanding for foreign exchange. Overall, the role of policy reserve ratio has been declining since 2012.
Keywords: Capital Flows, Credit Growth, Macro-prudential Policies, Threshold Vector Autoregression
source:Finance & Trade Economics ,No4,2014