Moreover, the issuance of central bank bills and the frequent adjustments of reserve requirement ratio in the banking system have also affected the operational behaviour of commercial banks and even the efficiency of the financial system. The sterilization cost for the central bank has also been on a rise. III.
A more flexible exchange regime helps enhance the effectiveness of monetary policy  According to the argument of Impossible Trinity, capital and financial account convertibility, independent monetary policy and exchange rate stability cannot be achieved at the same time. It is feasible for a small and open economy to pursue exchange rate objectives at the expense of monetary policy independence.