Bank Lending Behavior and the RRR
If we compare the financial system to a machine, the central bank's monetary base can be seen as production input and the broader money supply as the output after processing. What are the returns on a 1 yuan input? It is determined by the structure of the machine, and most crucially, by the reserve requirement ratio.
Without accounting for cash leakages, the money multiplier is the reciprocal of the reserve requirement, for instance, if the RRR is 20 percent, the money multiplier is 5. There is no direct link between the money multiplier and the loan-deposit ratio, but as a part of the financial system, the loan-deposit ratio also has an impact on monetary expansion.
- Black Holes
- Mecca: The Sacred City
- Graphics: China's Overworked Workers
- Capital's Gov't Says Subway Fares Will Double Starting December
- Despite Minor Disputes, Ties with China Best in History, German Envoy Says
- "Happiest People"
- Wal-Mart Says It Has Laid Off 28 Managers, 90 Others
- Robot Waiter
- Nanning Stabbings
- Another Brother in Prominent Shanxi Family Is Target of Graft Investigation
- Sign up to receive our free daily newsletter
- The Low Official Found with Towering Pile of Cash, Gold and Properties
- At Factory Waste Ponds, Fumes Choke Fantasies
- Clearing the Air with a Sino-U.S. Climate Pact
- Some Shanghai FTZ Reform Ideas Introduced to Rest of Country
- Closer Look: Why Shanghai-Hong Kong Stock Connect Was One-Way Road
- Justin Lin Ignores Population Factor with Growth Predictions
- Canceled Mexican Rail Contract Gives Chinese Firms Chance to Reflect
- Websites Offering Subtitles for Foreign TV Shows, Movies Shut Down
- China Needs All-Out Effort to Meet Emissions Goals, Experts Say
- A Passage to India