Monetary Liquidity And The Role Of Public Confidence In Financial Cirsis

Monetary liquidity, as the basic element of financial market, demonstrates the ability torapidly buy and sell large assets at a lower cost. Exploring the causes of monetary liquiditymovements is not only helpful in fully understanding financial market trends, but alsoessential for investors and government to make decisions. The financial crisis occurred in2008provides us with a fresh break. During the crisis, the credit-based liquidity creationchannel suddenly blocked, resulting in liquidity shortage from ample. Based on individual’spsychology behavior, namely public confidence, this paper reviews the status of monetaryliquidity of China during crisis, specifically, studies the impact of consumer confidence has onliquidity movement. This paper concludes with the following implications:(1)Publicconfidence does not just reflect economic fundamentals, but is also influenced by itself,namely self-realization process. And one of the key fuses of global financial crisis is the crashof public confidence. Therefore, strengthening public expectation as well as confidence. is ofcrucial importance to improve market liquidity situation.(2)We need pay close attention toborrow-and-lending convenience and the risk of the whole economy, rather then just focusedon traditional quantitative measures or on single level of interest rates.(3)The ConfidenceIndex, as a leading indicator of macroeconomic trends is sound. Therefore, strengtheningmonitor the movements of individuals’ psychological behavioral is applausive. Specifically, inthe actual operation of policy, we should give full play to the announcement effects ofpolicy, and ensure smooth export of monetary liquidity.