Research On Signal Identification,Conduction Path And Effectiveness Of Macro-prudential Policy

The global financial crisis in 2008 triggered by US subprime mortgage crisis have caused heavy losses to financial and real economy sectors of major economies in the world.However,data shows that there was only 1 trillion dollars in outstanding subprime mortgages of the U.S.real estate market in 2007.Although this crisis has caused the expected loss of several hundred billion U.S.dollars,in absolute terms,which is still not enough to bear full responsibility for this great recession.Reflecting the causes of the crisis,the fragility and systemic nature of the modern financial system are the main factors of crisis transmission and amplification.The lagging policy concept and the lack of supervision have led to the government's failure to play its role in this crisis.The contradiction between the development of financial liberalization and the lagging policy concepts as well as the absence of supervision has been highlighted.After the outbreak of the financial crisis,the global financial regulatory rules have undergone tremendous changes.In the Basel Agreement III,the Basel committee resolved the issue of "Basel II" which only focused on micro prudential supervision.It emphasized the idea of combining micro prudence and macro prudence,and put forward that we should strengthen supervision over financial systemic risks.Major economies of the world have also responded by adding macro prudential supervision in the policymaking according to their own actual conditions.In the United States,the FED has not only maintained the original regulatory power of financial institutions,but also been given power of macro prudential supervision and financial consumer right protection.In 2009,the British Parliament passed the "Banking Bill" and the White Paper of the "Financial Market Reform" of the Ministry of Finance to establish a Financial Policy Committee to monitor and resolve systemic risks that may threaten the entire financial system.In September 2010,the European Union Finance Ministers' General Assembly approved the "EU Regulatory Reform Program" and set up a European Systematic Risk Committee to strengthen macro-prudential supervision over the whole European Union.After the financial crisis,China's central bank has also begun to study macro prudential policy in accordance with the central government's deployment of a sound macro prudential policy framework.In the first quarter of 2011,the monetary policy implementation report firstly put forward the concept of macro-prudential management that introduced dynamic adjustment measures for differential reserves.In 2014,under the framework of the dynamic adjustment mechanism for differential deposit reserves,it also proposed a consensual lending instrument.At the end of 2015,the People's Bank of China upgraded the dynamic adjustment mechanism for differential reserves to a macro-prudential assessment system.At the end of 2016,the concept of “monetary policy & macro-prudential dual pillar” was put forward for the first time in the Monetary Policy Implementation Report,and then the Nineteenth National Congress proposed a policy to improve the two-pillar regulatory framework of monetary policy and macro-prudential policies.It can be seen that the macro-prudential policy in China is already in an equally important position with monetary policy.In view of this,the full text of the macro-prudential policy related issues were comprehensively analyzed.This paper applies a dynamic stochastic general equilibrium method and adopts a progressive research logic to study the fundamental issues such as signal source identification,conduction path,effectiveness,and collocation with monetary policy of macro-prudential policies systematically.We briefly introduce the method of solving and estimating the dynamic stochastic general equilibrium model used in the second chapter.In order to facilitate understanding the complex conduction path of dynamic random stochastic equilibrium model in the following chapters,the basic New Keynesian dynamic stochastic general equilibrium model is constructed and analyzed in Chapter 3.The subsequent chapters are integrated into the financial friction factors from different perspectives based on the NK-DSGE model.Chapter 4 builds a macro-prudential policy framework based on the classic financial accelerator DSGE model from the perspective of macro-prudential monetary policy and macro-prudential supervision.It builds an evaluation system based on the welfare loss function,identifies signal sources and establishes policy rules by traversing the parameters of signal source variables.What's more,we discuss issues such as the conduction path,policy spillover,and collocation of the two types of policies through simulated impulse response functions.The model of Chapter 4 is relatively simple,the transmission mechanism is clear and easy to analyze,but the detailed description of the problem is not perfect.In Chapter 5 modeling,we endogenous bank bankruptcy mechanism based on the BGG-DSGE model,and construct banking industry risk indicators.On the other hand,there are also some important improvements in the introduction of macro-prudential supervision,decomposing the fuzzy macro-prudential superposition into the supervision of commercial banks' capital adequacy ratio and the regulation of loan-to-value ratios.In terms of research issues,through the perspective of optimal monetary policy,signal variables are more systematically selected under functional goals with financial stability factors,and basic questions such as rules establishment,policy transmission paths,and collocation operations are comprehensively summarized combined with the results of Chapter 4.The model in Chapter 6 introduces the idea of liquidity management and incorporates more Chinese characteristics based on the BGG-DSGE model of the endogenous bankruptcy mechanism in Chapter 5.Refined liquidity management is the main feature of China's current monetary policy operations.This section will incorporate this feature into the model and study the effectiveness of China's macro-prudential policy tools.The signal source in this chapter is the actual signal source of China's existing macro-prudential policies,which is different from the focus of the first two chapters.We mainly consider the effectiveness of China's macro-prudential policies and the issue of the transmission and feedback mechanism of specific policy instruments.The conclusions of Chapter 4 and 5 show that: Firstly,the source of macro-prudential monetary policy should include capital asset prices,and macro-prudential supervision should focus on changes in credit volume;Secondly,the macro-prudential monetary policy and the macro-prudential supervision have huge differences in their conduction paths,policy orientation and characteristics.The macro-prudential monetary policy plays a role through the conduction path of monetary policy.The policy has a wide area of radiation and a strong spillover effect,while macro-prudential supervision directly acts on commercial banks,and its policy transmission path is short and the spillover effect is small;Thirdly,the establishment of a zoning macro-prudential management framework is an effective way to address policy spillover effect,target interference,and coordinated use of policies.As a standing policy,macro-prudential supervision is preferable to macro-prudential monetary policy.In the normal period of economic operation,establishing prudential management framework centered on macro prudential supervision can effectively share the responsibilities of monetary policy.When the economy is at a high risk,monetary policy concerned with financial stability factors is an effective solution.In addition,identifying drivers of exogenous shocks and extracting fluctuations in the economic cycle is crucial for macro-prudential policies to be more effective in maintaining financial and economic stability.Chapter 6 conducts numerical simulation of macro-prudential policies based on the dual-pillar financial regulatory framework of “monetary policy & macro-prudential policy”.We find that: Firstly,when the current operational logic of monetary policy is based on refined liquidity management,the conduction path between liquidity management and price-based monetary policy is very similar.However,theoretically,liquidity management plays a faster role in price index than price-based monetary policy,ultimately reducing social welfare losses.In practice,effective liquidity management requires precise measurement of liquidity requirements and supply,which is very difficult.On the contrary,the price-based monetary policy uses the benchmark interest rate as an intermediary target,and it is conducted to the real economy through the interest rate market and arbitrage relations.The operation is relatively simple.Secondly,when exogenous shocks tighten liquidity,it is crucial for the central bank to preset fine-tuning monetary policy and inject the liquidity accurately and timely.Thirdly,under the framework of the monetary policy of liquidity management,a macro-prudential management system centered on dynamic adjustment of deposit reserve ratio is effective.However,adjustment of the reserve requirement ratio has a very limited effect on the entire economy under the price-based monetary policy system with the benchmark interest rate as the intermediary target.Fourthly,the macro-prudential policies with “loan value ratio” and “capital adequacy ratio” as management indicators are all effective.The difference between the two is that the loan value ratio not only changes the preference of commercial banks,its reverse the feedback mechanism under rational expectations also can motivate enterprises to "reduce leverage",thereby reducing the proportion of corporate bankruptcies and better promoting the stable operation of enterprises.