Country's Central Bank Research Articles

Understanding the heterogeneity of interest rate adjustments to monetary policy: Evidence for Colombia

A fundamental problem in macroeconomics is understanding how changes made by a country's central bank to its interest rate affect the rates that people and businesses actually experience. In this study, we used Colombian bank-level interest rate data from loans and deposits between 2010 and 2019 to assemble panel data of 35,000 observations to analyze how banks adjust their rates when the central bank changes its rate. We applied a model based on industrial organization theory to estimate each bank's strategic complementarity, a measure of the bank's market power. We found that banks tend to split their rate adjustments into one that directly responds to the central bank's changes and another that responds to how rival banks react. The rates offered by banks for deposits adjust less steeply than those applied to loans. These rates vary heterogeneously depending on the bank's characteristics, with large domestic banks showing the most significant strategic complementarity and small or foreign banks showing the least. Our results showed that bank margins (profits) increase by 0.2% for every 1% increase in the policy rate.

A Critical Review on Future Trends of Digital Currency

In today's world, digital currency has become the most important part of our lives. Banks, the financial sector, and governments are encouraging digital currency exchange, and other online digital money has the potential to transform the financial sector. Through my research on digital currency, I will outline advantages, threats, and possible issues associated with it. When we talk about digital currency, it means more than just currencies. Cryptocurrencies are a part of digital currency. Digital currency includes various forms like cryptocurrencies, virtual currencies, and central bank digital currencies (CBDC). When Bitcoin started in 2009, it caught the interest of tech fans and curious people. A country's Central Bank issues Central Bank Digital Currency (CBDC), which represents a digital form of currency. Unlike cryptocurrencies like Bitcoin, CBDCs are usually supported by the governments and recognized as lawful tender. They represent a digital version of a nation’s official currency, and their purpose is to provide a digital alternative to physical cash but with any opportunity come risks like price uncertainty, Cybersecurity, etc. In December 2023, the Unified Payments interface (UPI) achieved a significant milestone, with over 1,200 crores transactions valued at more than 18 lakh corers, marking a peak in both transaction count and value [1]. Keywords: Cryptocurrency, Banks, Digital currency, CBDC, Bitcoin, Cybersecurity, Unified Payments Interface (UPI).

Analyzing the Pump Diesel and Gasoline Prices on Inflation in Pakistan: A New Evidence from Non-Linear ARDL

Maintaining inflation is one of the prime goals of the macroeconomic policy executed through the country's central bank. The persistence of inflation is considered a serious problem in developing countries because it erodes the standard of living of the majority of people. Nowadays, researchers are showing interest in energy price shocks as one of the drivers of inflation. So, the present study examines the role of pump diesel and pump gasoline prices on inflation controlling real exchange deprecation and urbanization using NARDL from 1990 to 2020. The result shows that the pump domestic diesel prices and pump domestic gasoline prices have a positively asymmetric impact on inflation in Pakistan. In contrast, real exchange deprecation and urbanization positively affect inflation. This study recommended that the government decrease the dependence on imported energy and focus on cheaper and domestic energy resources to fulfil the growing energy demand.

IMPACTS OF THE AFGHAN FROZEN ASSETS ON THE TRADE AND BAKING OF AFGHANISTAN

Valuable assets are reserves under the jurisdiction of the country's central bank that are used to support the national currency in emergency situations and financial crises in order to reduce currency fluctuations and access to services. Afghanistan has about nine and a half billion dollars of assets, which have been kept in various international banks and reputable financial organizations to stabilize the Afghan currency and strengthen and improve Afghan national and international trade. In 2021, when the Taliban took power in Afghanistan, the assets of Afghanistan were frozen by the United States of America, which created problems and shortcomings for the current Afghan government and the people of Afghanistan.
 The significance of the research study is to elaborate on and discuss the impacts of the Afghan frozen assets on the society, finance, and business sectors of Afghanistan and to find a fair solution to get rid of the mentioned challenges and drawbacks. The purpose of this research study is to identify and introduce the assets of Afghanistan, provide accurate data about the assets of Afghanistan, and describe their impact on the business and banking sectors.
 The doctrinal research methodology and descriptive, explanatory, and analytical research approaches are used in this work. It is worth mentioning that this research study is entirely based on library sources. The researcher concluded at the end of the research study that the issue of frozen assets, deteriorating economic conditions, unemployment, and non-recognition of the ruling government of Afghanistan are the major shortcomings confronting the Afghan banking and trade sectors.

Performance evaluation of different seasonal adjustment techniques

The central Bank of Bangladesh publishes financial data on weekly, quarterly, monthly, yearly basis. Among the published data, GDP, production, export, import, balance payment, wage earners remittance, Stock etc. are time-based which often subject to seasonal variation. But like most of the developed country's central bank such as USA, Australia, Singapore, UK, French etc. Bangladesh Bank does not publish seasonal adjusted data. These published time series are used by economists, decision-makers, and consumers to inform decisions. They look for key characteristics of economic series like trend, turning points, and coherence with other economic data. Seasonal shifts might occasionally make it challenging to see these features. Therefore, the research aimed to explore the best seasonal adjustment technique for different financial data published by Bangladesh Bank. Here, non-filter-based seasonal adjustment technique: Ratio to moving average, Ratio to trend, and SARIMA and filter-based technique: X-11 and X-13-ARIMA-SEATS was applied on monthly import and export data published by Bangladesh Bank. The seasonal adjustment method that produces fewer forecasting errors (MAPE, MASE, MAE, and RMSE) were decided as best technique for seasonal adjustment and X-13-ARIMA-SEATS method founds the appropriate seasonal adjustment method for our considered data. Therefore, X-13-ARIMA-SEATS method can be recommended to forecast monthly export and import of Bangladesh published by Bangladesh Bank.

International Currency Competition under the Background of Digitization and Its International Enlightenment to RMB

The emergence of digital currency has gradually shaken the status of traditional currency, people's traditional concept of currency is gradually being overturned, and traditional currency faces huge challenges and opportunities. With the increasingly fierce international currency competition, digital currency faces multiple challenges and opportunities. Under the background of digitization, the development of digital currency has had a huge impact on the existing international monetary system. On a global scale, central banks in different countries in the face of digital currency issuance have a more positive and open attitude, and this means the emergence and development of digital currency have a great probability of reconstructing the existing international monetary system. Our country's central bank leads the world in the research and development and issuance of digital currency, which not only enables more countries to pay attention to the RMB but also promotes the RMB to go global and further expands the circulation scale and quantity in the international trade market.

Is Price-Based Monetary Policy Effective?—Empirical Evidences from the Data during COVID-19

After the reform of mechanism of exchange rate, our country's central bank's monetary policy regulatory framework has gradually transformed from a quantitative framework to a price-based framework. However, the academic circles have different views on the effectiveness and applicability of these two monetary policy frameworks. In order to verify the effectiveness of price-based monetary policy, this article used the data during the period of the COVID-19 to conduct empirical tests. We found that price-based monetary policies can effectively smooth out macroeconomic fluctuations and promote stable economic development. Moreover, we propose that in order to further accelerate economic recovery, the central bank should take measures such as lowering the benchmark interest rate.

Analisis pengaruh utang pemerintah terhadap perkembangan nilai tukar Negara Oman

The Oman Rial is the currency with the third highest exchange rate in the world. 1 Oman Rial - US$2.6 or Rp. 36,000. The exchange rate against the Omani USD was reported at 0.385 OMR/USD. With Oman's currency high, the government and the country's central bank had to issue banknotes in denominations of 1/4 and 1/2 rials to accommodate transactions of small value. This study aims to analyze the factors that influence the movement of the Oman riyal exchange rate, using secondary data sourced from the World Bank and IMF in 1984-2019. Data analysis using multiple linear regression through the Eviews application. From the analysis, it is known that interest rate, term of trade, public debt, and reserves affect the exchange rate. Interest rate, term of trade, and public debt have a negative effect on the exchange rate with a regression coefficient of -0.000295 , -0.008934 , and -0.000164, respectively. Reserves have a positive effect on the exchange rate with a coefficient of 2.13. The variables that have a very large influence on the exchange rate are reserves.

A disaster always rings twice: Early life experiences and central bankers' reactions to natural disasters

AbstractWe analyze the impact of natural disasters experienced in the early life of central bankers to assess their reaction to present‐day similar events. We use a panel dataset covering 68 (developed and developing) countries, for the period 2000 Q1 to 2017 Q4, to examine how the very‐short‐run dynamics of inflation is affected by the (actual) natural disasters, and how past experiences affect the immediate reaction of central bankers to these shocks. Our results reveal that the effect of early‐life experiences is significant: central bankers who have been exposed to disasters in early life tend to manage inflation in a more conservative way in the very‐short‐run. The effect disappears over the course of one year, and central bankers with superior voting power have a larger influence on outcomes. Younger central bankers are more conservative than older ones, which may reveal that the early‐life disasters' impact decays over time. The European Central Bank (ECB) appears immune to such influences, in conformity with expectations given the ECB's federal architecture and the size of the area it administers. The behavior revealed by our results thus signifies that central banks tend, on average to avoid any inflationary bias, inducing that the long‐run impact of a disaster suffered in the formative years of an individual can bring socially positive consequences, when such an individual becomes governor of her country's central bank.

Стійкість фінансової системи: сутність, вразливість, шляхи забезпечення

The state financial system must function smoothly and respond promptly to destabilizing exogenous and endogenous factors that can arise at any time. Therefore, ensuring the financial system's stability and improving its mechanisms is an important component of public policy. The purpose of the article is to reveal the essence of the financial system's stability, identify internal factors of the financial vulnerability of Ukraine that may affect the effectiveness of the country's financial system, and find ways to overcome them. The content of the concept of "stability of the financial system" is revealed. It is established that the use of different terminology indicates the complexity and, at the same time, the versatility of this term. According to international experience, the country's central bank has a decisive role in assessing the stability of the financial system; in Ukraine, this function is performed by the National Bank of Ukraine. It was found that inefficient use of budget funds is one of the key factors in the financial system's vulnerability. The state of execution of the State Budget of Ukraine in 2020 is analyzed. It has been established that over the last decade, the budget has been executed with a deficit, and the existence of a significant budget deficit leads to a movement in the “debt spiral”. The Government borrows a significant amount of money to implement the budget, and therefore it is becoming increasingly difficult to attract them on reasonable terms. Failure to receive the funds leads to late spending. Thus, the budget deficit, public debt, and inefficient use of budget funds are the internal factors that increase the financial system's vulnerability and undermine its stability.

Central bank regulation, religious governance and standardisation: evidence from Malaysian Islamic banks

This study explores the modus operandi and regulatory influence of the pioneering Malaysian dual-layer governance system where, besides an Islamic bank's in-house religious board, supervision is undertaken by the country's central bank via its own Shariah Advisory Council (SAC). Data was collected by means of in-depth interviews with SAC members, central bank compliance officers, bank chairmen and members of Shariah boards, CEO's and other senior executives. We find that the procedures asserted by this over-arching governance structure contributes to standardising practice without hampering creativity when innovating new Shariah compliant financial products. Considerable bureaucracy is reported to exist due to the current approval process impeding efficient decision-making. In particular, the SAC is found to be decisive in resolving disputes from the widespread use of the 'legal reasoning' (or ijtihad) principle exercised by boards providing the much needed confidence and market discipline required by stakeholders. Finally, we highlight how this form of banking operates best when left to a country's own governance framework rather than imposing international regulation for this nascent industry.

The mechanism of synergetic interaction of policy instruments of central banks with the governments of their countries as an element of increasing the level of economic development in the face of an epidemic threat

Goal. The purpose of the research is to conduct a comparative study of the work of the Central Bank of the world with their governments in the context of forming a mechanism for synergistic interaction of its economic policy instruments to improve the level of economic development. Topicality. The actualization of this study is the need to establish effective formal and informal links between the central bank as a system-forming financial institution that shapes the monetary policy of the state and the government as a governing body that creates a virgin economic policy. There is a need for a systematic comparative analysis of the experience of developed and developing countries in order to form an effective tool for economic policy of the central bank with its government and make effective management decisions aimed at improving the level of economic development. Results. The system of relations between the central bank of developed and developing countries and their governments is described. Factors of positive and negative influence on the formation of economic policy tools of the central bank of the countries and their governments are revealed. Formal and informal links have been analyzed between the world country’s central bank and its government in the process of implementing the central bank’s economic policy. The mechanism of synergetic interaction of the tools of economic policy of the central bank of the countries with their governments is improved, which contains indicative indicators of the interactions of the central bank, ministries, government of the countries for the purpose of making effective management decisions. The necessity of systematic work of all stakeholders (central bank, government, other stakeholders) in the process of forming economic policy, the implementation of which can affect the level of economic development of the state, is substantiated. Conclusions. The comparative analysis with elements of benchmarking estimation is carried out The mechanism of relations of the central bank of the country with its government is improved. The role of this interaction of the country's central bank with its government and other stakeholders was assessed.

DETERMINANTS OF ASSETS GROWTH OF FOREIGN OWNED BANKS IN INDONESIA

The aim of this research is to assess the dominant factors enabling foreign owned banks to increase their assets in Indonesia and to confirm whether the “follow the customers hypothesis” is also applicable in motivating foreign owned banks to do business in Indonesia to support investment and trade activities of the companies originated from foreign countries. Using the panel data of 28 foreign owned commercial banks in Indonesia between 2006-2015 obtained from Indonesian Banking Directory, Indonesian Banking Statistics databases, foreign country central bank websites, a least square dummy variable (LSDV) regression model was applied to examine the effect of Bilateral Trade, Foreign Direct Investment (FDI), Interest Rate Differences, Domestic Deposits, Parent banks Return on Assets (ROA) and Length of Time presence of the foreign owned banks in Indonesia on Assets or Size of Foreign Owned Banks. The main findings is that the decisions by foreign owned banks to operate and to expand its business in Indonesia is predominantly affected by the increase in realization of projects funded by Foreign Direct Investment from counterpart countries, third parties fund or domestic deposit denominated in foreign currencies, profitability of the parent banks in home country and long time presence in Indonesia to enable parent bank and their branches or subsidiaries gain better operating experience, better general managerial expertise and better knowledge of local environment. Bilateral Trade and Interest Rate Differences between home and host country has no impacts at all on Assets of Foreign Owned Banks. “Follow the customer hypothesis” is applicable in Indonesia only in terms of FDIs but not applicable in terms of bilateral trade. The findings will help management of the banks in designing more reliable business plan and also used as input or tools for policy makers prior issuing the license for the newly open foreign owned banks offices or increase of its branch offices. It is suggested foreign owned banks to consider empowering its trade financing scheme which will increase the banks size or assets.

미국 통화정책이 국내 금융시장에 미치는 영향 및 자본유출입 안정화방안 (The US Monetary Policy Normalization: The Impact on Korean Financial Market and Capital Flows)

Korean Abstract: 본 연구는 글로벌 자본유출입 결정요인 및 미국 통화정책이 국내 금융시장에 미치는 영향을 분석하였다. 실증분석 결과 신흥국의 자본유출입은 주로 대외요인에 의해 영향을 받았으나, 국가별로 자본유출입 결정요인이 상당히 상이한 것으로 나타났다. 미 연준 통화정책 정상화가 국내 금융시장, 외환시장에 미치는 파급영향을 분석한 결과 미 정책금리, 기간프리미엄, 신용스프레드 등이 높아지면 국내 신용스프레드 확대 및 원/달러 환율 상승(원화 약세) 등을 초래하여다. 아울러 내국인 해외투자자금이 회수되면서 외국인 국내투자자금 이탈을 상쇄시키는 모습을 보였다. 그동안 내외금리 차 확대가 곧바로 자본유출로 이어진다는 우려가 컸다. 하지만 2014년 이후 '내국인 해외 증권투자자산 > 외국인 국내 증권투자' 구조 정착 및 내국인 해외투자자금의 환류 가능성 상승 등으로 '내외금리차 확대 → 자본유출 증가' 리스크가 과거보다 줄어들었다는 점을 시사한다. English Abstract: During the global financial crisis, the US monetary authority (Fed) reduced the benchmark interest rate to 0% and provided massive liquidity through three quantitative easing measures. As a result, the US Fed balance sheet expanded five times ($ 4.5 trillion) from September 2008 ($ 0.9 trillion). Much of the increased global liquidity flowed into emerging economies. The influx of capital contributed to the growth of emerging economies, leading to new credit increases such as bank loans. Emerging markets, which supported 63% of global GDP, served as an engine of the global economy at a time when the growth in the US and Europe were subdued. While capital inflows have a supporting role in contributing to economic growth, they have also been a potential prompting factors to systemic risk in emerging countries and Korea. Emerging economies actively responded to systemic risks from foreign capital inflows. With the introduction of macro-prudential policy measures, emerging economies have been striving to maintain an external balance by responding to the surge in domestic credit and restraining excessive capital inflows. In order for emerging countries to adopt measures to curb inflows of capital, persuasiveness and legitimacy are secured only if external influences are triggered by external factors. Most previous studies have shown that push factors have had a greater impact on capital outflows in emerging economies than in pull factors. Raghuram Rajan, former central bank governor of India, has pointed out that the monetary policy impact of the US Fed and the developed country central bank is a major external factor (push factor). Meanwhile, in May 2018, the US Federal Reserve Chairman Jerome Powell addressed the controversy over capital movements to emerging economies after the global financial crisis. Powell said the inflows of capital into emerging economies is unlikely to have been caused by the Fed’s interest rate policy. According to the study, the US Fed’s quantitative easing has had the effect of lowering the Fed base rate by a further 4%. This means that normalization of the quantitative easing policy will lead to a policy rate hike of 4 percentage points. This is the reason why the normalization of US monetary policy will have a negative impact on the global economy. At the same time, the squeezing on capital outflows in emerging economies is increasing. Powell’s speech contains “implied” warnings that the US monetary policy is not a triggering force of a capital outflow in emerging economies. That’s why Powell’s speech is adding to the difficulty of policy responses in emerging countries. This suggests that it is necessary to check the determinants of global capital flows. In addition, the impact of US monetary policy on Korea's financial markets and capital outflows needs to be analyzed in depth.

Особливості регулювання і нагляду за діяльністю фінансових установ в ЄС

The objective need to find an effective form of institutional support in the context of introducing innovations in the activities of financial institutions, and the instability of the sectoral model of regulation and supervision of the financial institutions activities have led to integration and consolidation processes in the regulatory and supervisory systems of most EU countries. The purpose of the article is to disclose the structure of the system of regulation and supervision of the financial institutions activities in the EU at the international and national levels and to determine the features of the implementation of the state subsystem at the national level to use international experience in further improving the regulatory and supervisory system in Ukraine. The block diagram of the regulation and supervision of financial institutions activities in the EU countries was designed, based on a combination of state and market subsystems. The analysis of the features of the implementation of state regulation and supervision of the financial institutions activities at the national level in the EU countries - Germany, Italy, Great Britain was carry out. It was revealed that the effectiveness of the functioning of the sectoral model with a large number of authorized bodies depends on the level of interaction and information exchange between them and a clear distribution of powers between these bodies. It was proved that there are no significant fundamental differences between the consolidated system implemented in Germany and the integrated system in the UK, since the country's central bank is involved in macroprudential supervision. But, the system of protecting consumers and investors in the UK is more complex than in Germany, since it provides for the functioning of an additional authorized body. It can complicate the process of protecting consumers and investors. The trends in the consolidation and integration of the functions of regulation and supervision of the financial institutions activities are important for Ukraine, because the sectoral approaches used by the Ukrainian supervisory practice in many countries have proved ineffective in the context of the rapid development of financial services markets.

The Not So Targeted Instrument of Asset Freezes

AbstractAsset freezes are sometimes viewed as the quintessential form of targeted sanctions—relatively effective in achieving their goals, while affecting only the individuals and companies that are “bad actors.” However, as part of the roundtable “Economic Sanctions and Their Consequences,” this essay argues that there are significant ethical problems raised by asset freezes and other forms of targeted financial sanctions. Sanctioners (specifically, the United Nations Security Council and the U.S. government) have long been criticized for targeting individuals and companies for arbitrary reasons or without adequate due process. However, there is a second concern that is less well known. Asset freezes and other targeted financial sanctions may be imposed on government officials, government agencies, or private companies that hold a critical role in the target country's economy. A country's central bank, national oil company, or national shipping line, for example, may be severely compromised as a result of its inclusion on a financial blacklist. In addition to the explicit prohibitions imposed by targeted financial sanctions, there is a chilling effect as well. This can be seen when international banks and corporations withdraw from the target country altogether because the burden of compliance with these measures is so great, and the potential penalties so high.

Deposit insurance: A way to secure your money deposited into bank

Deposit insurance is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability. Deposit insurance institutions are for the most part government run or established, and may or may not be a part of a country's central bank, while some are private entities with government backing or completely private entities.

Assessing nature of competition in banking sector of Pakistan

This study examines the nature of competition in banking sector of Pakistan and assesses whether the banking sector is in long-run equilibrium or not. The study uses annual panel data for a sample of 30 banks, over the period 2007–2015 by employing Rosse and Panzar (1977) methodology. The findings show that banking sector of Pakistan is operating under characteristics of monopolistic competition. The findings further show that the equilibrium hypothesis is rejected for the banking sector over the period of analysis. The current study is expected to benefit policymakers, banking sector itself and the country's central bank. The findings confirm that massive deregulations and financial liberalization has contributed positively and has improved competitive condition of the banking sector that is expected to improve further in the future.

What measure of inflation should a developing country central bank target?

In closed or open economy models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. We analyze this result in the context of developing economies, where a large proportion of households are credit constrained and the share of food expenditures in total consumption expenditures is high. We develop an open economy model with incomplete financial markets to show that headline inflation targeting improves welfare outcomes. We also compute the optimal price index, which includes a positive weight on food prices but, unlike headline inflation, assigns zero weight to import prices.

China’s Debt Woes: Not Yet a “Lehman Moment”

I. INTRODUCTIONAccording to a 15 June 2014 report by the rating agency Standard & Poor's (S&P), China has reached an ominous milestone.1 The country's $14.2 trillion corporate (or owed by non-financial companies) is the highest in the world, exceeding even the world's biggest debtor, the United States which has an estimated $13.1 trillion in corporate obligations.2 S&P estimates that if the current pattern holds, China's and refinancing needs will reach $20.4 trillion in 2018 - or one-third of the worldwide corporate borrowing (Table 1). More troubling, S&P estimates that anywhere between one-quarter to one-third of China's corporate comes from the country's banking sector - a complex and sprawling network of nonbank lenders that serves borrowers who otherwise would have difficulty accessing credit.3 According to S&P estimates, the of China's shadow banking is between $4 trillion to $5 trillion. This suggests that roughly 10 percent of global corporate is exposed to the risk of a contraction.However, corporate makes up just one component of China's - albeit, it is the largest component. A sovereign's total debt includes debt, the of its financial institutions, non-financial businesses and households. According to the Chinese Academy of Social Sciences (CASS), China's stood at RMB 111.6 trillion (about $18.5 trillion) at the end of 2012 - or 215.7 percent of that year's GDP. Of this amount, corporate totaled 58.76 trillion yuan which equaled 113 percent of the country's GDP in 2012, (including government4) totaled 27.7 trillion yuan or 53 percent of GDP, the household totaled 16.1 trillion yuan and bonds issued by the financial totaled 9.13 trillion yuan.5Yet, these figures are probably on the conservative side because calculations of ratios can vary widely depending on types of credit included. And in the case of China, government debt does not always include the owed by the state-owned enterprises (SOEs), the state-owned banks, and the various special purpose asset-management companies, including the local financing vehicles or LGFVs (which are commercial window companies set up by governments to access credit) which hold large volumes of nonperforming loans. Not surprisingly, Standard Chartered estimates that as of March 2014, China's stood around 142 trillion yuan ($22.7 trillion), or 245 percent of GDP - a sharp increase from about 150 percent in 2008.6 However, according to Standard Chartered, by June 2014, China's debt-to-gross domestic product ratio had reached 251 - a sharp increase from 147 percent at the end of 2008.7II. CHINA'S GROWING DEBT WOESIn order to blunt the adverse impact of the external shock triggered by the global financial crisis of 2008, in particular, the sharp fall in export demand from the advanced economies, Beijing implemented a massive stimulus program ostensibly designed to structurally shift or rebalance the Chinese economy from its export-driven growth path to one led by investment spending. Specifically, in early 2008, Beijing put in place a massive RMB 4 trillion (about US$600 billion) stimulus package to boost the nation's economy. The central government's funding was around RMB 1.18 trillion with the rest funded by the governments via the LGFVs. Monetary policy also played a key role in supporting the stimulus program. To this effect, the country central bank, the People's Bank of China (PB°C) cut the policy rate four times from 7.5 percent in August 2008 to 5.3 percent in December 2008, and maintained the rate through September 2010. Moreover, the PB°C lowered the required reserve ratio on RMB deposits from 17.5 percent in August 2008 to 13.5 percent in December 2008, including relaxing bank loan quotas and lifting broad money (M2) growth targets till end-2010. …