The Relationship Between Treasury Cash Management and Monetary Policies

Abstract

Treasury cash management interrelates with the budget implementation, monetary policies, debt management and financial market development. The relationship between the treasury cash management and the monetary policies is the most crucial and most primary one. Tax revenues are deposited in treasury account that affects monetary policy. At the same time, the treasury cash will also have an impact on the money market through fiscal expenditure and market operation. The relationship between the treasury cash management and monetary policy in developed countries has formed a relatively stable institutionalized mechanism. However, the treasury reform in developing countries faces various difficulties. It is very important to sort out the relationship between the treasury cash management and monetary policy for the reform of the national treasury system in developing countries. This paper takes China as the research object and discusses the relationship between the treasury cash management and the monetary policies. The analysis results show that the treasury cash management mainly affects the monetary policies by the stock funds, and different effects are accounting for corresponding investment methods. Investment in the fixed-term deposits in the commercial banks, due to the existence of collateral effect that it cannot lead to any equivalent increments of the liquidity in the commercial banks. Whereas investment in the monetary market may have an impact on short-term interest rates.