Essay on Correlation Between the Assets Scale of China Central Bank and Gdp Output.

Submitted By kittywwj
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Correlation between the assets scale of China central bank and GDP output. Since the beginning of economic reform in 1978, China’s performance in economic growth and the financial sector expansion has been impressive. Over the period 1978-2001, the Chinese economy saw an annual growth rate of 9.4% in real terms, whileloans outstanding relative to GDP increased from 51.1% to 117.1% (China Statistical Yearbook, various years). It appears that fast economic growth and development of financial intermediation go hand in hand. Chen, H., ‘Development of Financial Intermediation and Economic Growth: Chinese Experience’ Existing between the two parts of the central bank domestic, foreign and domestic GDP have a stable long-term relationship exists between them and shows a significant positive correlation. Therefore, by the expansion and contraction of the central bank balance sheet to promote macroeconomic development is a viable long-term policy tool
1. Domestic and international asset size of the central bank in a certain significant level of GDP reasons. This indicates that the central bank's monetary policy and
Non-passive with the fluctuations of GDP, but has the leading role, and can take the initiative to regulate economic development, promote GDP growth. Therefore, the central bank Should pay attention to and focus on its own balance sheet management, flexibility in the use of monetary policy tools to regulate the economy, to avoid financial resonance "caused" economic resonance. " Lin,Q(2010) Central banking asstes scale and economic development
2. Control of the central bank balance scale needs both volume and structure. The high proportion of foreign exchange assets and the proportion of low inflation has become the people prominent feature of the bank asset allocation. But the result showed that the current foreign exchange reserve currency deposits and reserve currency bonds and other investment assets based on asset allocation model is likely to cause in the reserve currency countries to provide cheap funds to support their large financial resources idle. Therefore, while the total analysis of the assets of the Central Bank, should focus on structural adjustment, more concerned about the foreign currency reserve assets other than assets, especially domestic asset projects, to achieve the unity of the asset