Short-term Interest Rate Control in a Tiering System:Experience,Mechanisms,and Implications
Following the 2008 financial crisis,global monetary policy shifted towards a pattern marked by low or negative interest rates and ample liquidity,precipitating challenges like a contraction in interbank market activity and re-duced institutional profitability.In response,tiering systems emerged as a solution.This paper constructs reserve demand models for the interbank market to examine how different tiering systems impact short-term interest rates.Subsequently,it reviews tiering system policies in New Zealand,Denmark,Norway,the Eurozone,Switzerland,and Japan,discussing their advantages and roles,and exploring potential applications in China.The analysis reveals that an interest rate corri-dor featuring a tiering system effectively guides short-term interest rates,boosts market transactions,and safeguards bank profitability.The efficacy of such a system hinges on the design of exemption rules.While there is presently no im-perative for China to implement a tiering system,it could be considered as a strategic option to address the prolonged downward trend of the natural rate and facilitate the smooth introduction of the central bank's digital currency.The con-clusions of this study offer insights for enhancing China's monetary policy framework,tailored to its national context,conducive to high-quality economic development,and aligned with the requirements of modernization with Chinese characteristics.
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