Abstract:

Owing to the risk aversion (hard credit risk constraint) and deposit preference of state-owned commercial banks, their credit supply is not sufficient, deposit demand is too big, and balance of their deposits to loans is enlarging. As a result, the transmission mechanism of credit channel of our country's monetary policy is not smooth under a condition of interest rate control. We should improve transmission mechanisms of the credit channel.

Key words: credit risk, risk aversion, soft deposit cost constraint, balance of deposit to loan, credit channal of monetary policy