The Analysis On The Micro-effects Of Macroprudential Policies

The outbreak of the 2008-2009 global financial crisis urges financial regulators and scholars to reflect the weaknesses of micro-prudential regulation that focusing on individual financial institution only cannot ensure the stability of the entire financial system.To contain the systemic risk in financial department and maintain the safety of the whole financial system,macroprudential regulation emerges and creates lots of discussion.In the recent years,countries all around the world engage in actively exploring the construction of macroprudential regulation framework.In particular,macroprudential policy has been raised to the same status as monetary policy in China.In addition,macroprudential policy in China has a long history of implementation,a relatively high frequency of adoptions and a toolkit with abundant macroprudential tools,making it an ideal research context.However,literature on the effectiveness of Chinese macroprudential policies,their impacts and working mechanisms on the bank and firm level are relatively scarce.Therefore,this dissertation investigates the effectiveness of macroprudential policies in China from the perspective of individual banks and firms,mainly focusing on the influence of macroprudential policies on bank risk and firm financing as well as the potential underlying mechanisms.This research could enrich the literature on the microimpacts of macroprudential policies to some degree and is of great practical values and strong policy implications.Firstly,we clearly comb the concept and evolution of macroprudential regulation,and distinguish it from micro-prudential regulation.Then,we introduce the framework of macroprudential policy in detail.Furthermore,we introduce the current situation of macroprudential policy implementations both at home and abroad,emphasizing the uniqueness and development of macroprudential policies in China.In the following part,we conduct a comprehensive literature review relative to the impacts of macroprudential policies on bank risk and credits of banks and firms.Based on the review,we raise our own research topics and research meaning.In the empirical analysis part,the dissertation firstly utilizes the data of Chinese commercial banks to directly examine the effectiveness of macroprudential policies in containing bank risks.We focus on not only the ultimate goal of macroprudential policies,dampening the systemic risk,but also its intermediate goal,reducing individual bank’s risk-taking.The results indicate:the tightening of macroprudential policies not only reduce banks’ systemic risk exposure and contribution effectively,but also contain the risk-taking of individual banks significantly;macroprudential policy instruments in different groups differ in their impacts on bank risk;the influence of tightening and easing macroprudential policy is asymmetric,i.e.,they work in opposite direction and differ in intensity as well;banks with larger size and listed banks are more affected by macroprudential policies,while more concentrated bank system and loose monetary policy stance weaken the risk-reducing effectiveness of macroprudential policies;lastly,the potential channels through which macroprudential policies work on bank risk include reducing banks’ leverage,increase banks’ profitability,reducing the volatility of banks’ profits and promoting the competitiveness of banking sector.After examining the effectiveness of macroprudential policies in containing systemic and bank risks directly,we turn to their influence on one of the intermediate objectives,dampening credit expansion.The extant literature finds that macroprudential policies significantly affect the aggregate credit expansion and credit growth on bank level.As their effects on the credit on both the aggregate level and bank level would finally transmit to the micro-economic agents,firms,we then investigate from the perspective of firms the effects of macroprudential policies on firms’financing activities,to enrich the literature on the micro-impacts of macroprudential policies.Firstly,we utilize the data of Chinese non-financial public firms to study the nonlinear impacts of macroprudential policies on firms’ bank financing.We find the following results:tightening macroprudential policies significantly reduce the bank financing of firms,and the impacts display a U shape.To be specific,the reduction effects on firms’bank financing first increase with the quantile of the distribution of firms’ bank financing level,and it reaches peak around the median,but the effects turn to decrease afterwards;macroprudential policies mainly work on firms’ short-term bank financing,while their impacts on the longterm bank financing are relatively trivial;the macroprudential tools working on financial institutions and those aimed at increasing the resilience of financial system to adverse shocks are more effective;loosening macroprudential policies work in the opposite direction to tightening macroprudential policies,and their effects are more intense on average,but their effective quantile range is narrower;within specific quantile ranges,the bank financing of private firms and firms with smaller size is more negatively affected by the tightening of macroprudential policies,and manufacturing industry is more affected as well.When firms’financing from banks are adversely affected,they would search for other financing sources to maintain their normal operations.Trade credit,as an important short-term financing channel for firms,has an inconclusive relationship with bank credit in the literature.Therefore,to deeply investigate the impacts of macroprudential policies on firms’ financing activities,we further examine their effects on another financing channel of firms—trade credit.The main conclusions are as follows:tightening macroprudential policies promote firms’ usage of net trade credit by decreasing the provision of trade credit to customers and increasing the utilizing of trade credit from cooperators;macroprudential instruments in various groups differ in their influence on firms’trade credit;trade credit and bank credit are substitutes,as the trade credit of more bank-dependent firms is more affected by macroprudential policies.And this substitution mainly exists between short-term bank financing and trade credit;firms with better profitability and higher growth rate are less affected by macroprudential policies,while the provision and usage of trade credit for state-owned-firms are both strengthened;furthermore,macroprudential policies also significantly affect the maturity structure of firms’trade credit.They mainly shorten the maturity of accounts receivables,while the maturity structure of accounts payables is not significantly changed.The innovations of this dissertation are as below:Firstly,the dissertation provides new evidence on the effectiveness of macroprudential policies in China and their micro-transmitting mechanisms from a new perspective.The existing literature mainly utilize cross-country and macro-level data to do research,where the endogeneity issue and the incomparability of macroprudential policies across countries could be severe,while literature based on micro-level data is relatively scarce.In addition,studies on the Chinese macroprudential policies are usually based on one specific macroprudential instrument,lacking of comprehensive investigations,especially from the micro-level perspective.We instead utilize data from both banks and firms to examine the impacts of macroprudential policies on bank risk and firms’financing activities.The perspective from both financial institutions and microeconomic entity allows us to comprehensively explore the microtransmitting mechanisms of macroprudential policies,complementing and extending the related literature.Secondly,the dissertation explores the effect of macroprudential policies in China on banks’ risks more fully and deeply.We use more abundant bank data from multiple data resources and focusing on both banks’systemic risks and individual banks’ risk-taking.Compared to researches studying only one type of bank risk,we could reveal macroprudential policies’ impacts on bank risks more sufficiently.Besides,different from the domestic studies focusing only on one specific macroprudential instrument,we utilize more comprehensive macroprudential policy data from more authoritative sources,so that we could not only examine the overall effects of macroprudential policies but also discuss the heterogeneity of the effects of various macroprudential instruments.Finally,we further explore the potential mechanisms by which macroprudential policies work on bank risks,complementing the extant literature on the lack of mechanism discussion.Thirdly,this dissertation extends the research on macroprudential policies’influence on firms’financing activities.Research on the effects of macroprudential policies from the perspective of firms is limited both at home and abroad,this study could enrich the related literature.Furthermore,combined with studies on the impacts of macroprudential policies on macroeconomic variables and bank credit,this work could help to reveal the transmitting mechanisms of macroprudential policies from macro-level to micro-level and from banks to firms,benefiting the future researches on the spillover effects of macroprudential policies on the real economy as well.In addition,as we study macroprudential policies’influence on both firms’bank financing and firms’trade credit,the results complement the literature on the relationship between bank credit and trade credit,providing new evidence from the perspective of macroprudential policies.