The Impact of Residents' Leverage Ratio on the Effectiveness of Monetary Policy: Evidence from a Panel of Chinese Prefecture-Level Cities

This paper examines panel data from 127 prefecture-level cities between 2015 and 2023 to investigate the relationship between resident leverage ratios and the effectiveness of monetary policy. The study finds that as resident leverage ratios increase, the effectiveness of monetary policy regulation is diminished. By setting different explanatory and response variables, the article demonstrates that an increase in resident leverage ratios diminishes the effects of quantitative monetary policy and price-based monetary policy. Furthermore, the paper reveals that resident leverage ratios lead to regional heterogeneity in the effectiveness of monetary policy, indicating that in areas with lower resident leverage ratios, the effectiveness of monetary policy is reduced.