Does Targeted Monetary Policy Matter?

38 Pages Posted: 10 Dec 2016 Last revised: 20 Feb 2018

See all articles by Wenzhe Li

Wenzhe Li

Tsinghua University, PBC School of Finance; The People's Bank of China (PBC)

Date Written: December 6, 2016


Several major central banks have experimented targeted monetary policy to improve credit resource allocation. This policy only applies to eligible banks. For example, The People’s Bank of China conducted 7 targeted reductions of reserve requirement during 2014-2015. This paper first in the literature documents the phenomenon of targeted monetary policy and evaluates its effects. The results show that in the case of China, it generates extra, significant positive return on stocks of eligible banks, amounting to 1.2%-1.3% in 4 days’ treatment period. This substantial return should give commercial banks strong incentive to align with policy goals of central banks.

Keywords: Targeted monetary policy, Credit resource allocation, Central banking

JEL Classification: E52, E58, G21, G38

Suggested Citation

Li, Wenzhe, Does Targeted Monetary Policy Matter? (December 6, 2016). Available at SSRN: or

Wenzhe Li (Contact Author)

Tsinghua University, PBC School of Finance ( email )

No. 43, Chengdu Road, Haidianqu
Beijing, 100083

The People's Bank of China (PBC) ( email )

No.32 Chengfang Street, Xichengqu
Beijing, 100800

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics