Abstract
ABSTRACT This paper integrates changes in the reserve requirement ratio with other related monetary policies and estimates the offset and sterilization coefficients to examine the effectiveness of China’s sterilization operations. The results show that China’s sterilization operations have been fairly effective and China has been able to control domestic money supply relatively well despite a limited degree of exchange rate flexibility. The results also indicate that the failure to take changes in reserve requirements ratio into account leads to a substantial underestimate of the effectiveness of China’s sterilization operations, illustrating that this policy is nonnegligible in studying China’s sterilization operations.
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