Abstract
People’s Bank of China created the Standing Lending Facility (SLF) in June, 2013. As a tool of monetary policy, standing lending facility is created to maintain the stabilization of monetary market and help country’s economy develop steadily. In developed countries, tools like SLF have already been used much earlier than China, so this time I will use their research methods and try to study the transmission mechanism of China’s SLF. Meantime, in the background that China is carrying forward market-based reform of interest rates, the application prospect of SLF will be at the same time discussed.
Highlights
At the beginning of 2013, People’s Bank of China created a new monetary policy tool, the standing lending facility (SLF)
As a tool of monetary policy, standing lending facility is created to maintain the stabilization of monetary market and help country’s economy develop steadily
To China, Standing lending facility may be a new thing, but in western countries, monetary policy tools such as lending facility have existed for a long time, just in different names
Summary
At the beginning of 2013, People’s Bank of China created a new monetary policy tool, the standing lending facility (SLF). SLF is a central bank’s monetary policy instrument which can control market liquidity It was created mainly for bank system’s need to ease short-term liquidity tight. The standing lending convenience has these features: first, the financial institutions need to take the initiative to apply according to their own liquidity; second, central bank and financial structure apply “one to one” transaction; third, SLF has a wide range of counterparty coverage. Based on the former analysis, this paper introduces the transmission mechanisms of SLF in China. Introduction of the Application of Domestic and International Standing Lending Tools
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