An Exploration Of The Impact Of China’s Monetary Policy On Financial Systemic Risk

With the rapid development of financial markets, financial systemic risk is increasinglyattracted people’s attention, so the impact of monetary policy on financial systemic risk hasbecome the people’s concern. As the study of monetary policy impact on the financialsystemic risk began to develop after the2008financial crisis, and foreign scholars havestudied mostly, the literatures are rarely suitable for China’s national conditions.Therefore,this article is based on the status quo of China’s financial markets and seeks to explore theimpact of our monetary policy on financial systemic risk.The paper first reviews the definition,factors,index construction and the influence ofmonetary policy to financial systemic risk discussed by domestic and foreignscholars.Subsequently on the basis of detailed discussion before,we discuss our financialsystemic risk,conduction mechanisms of monetary policy on financial systemic risk and theimpact of monetary policy on financial systemic risk.Then combined with China’s actualsituation,we build a measurement of financial systemic risk, and select the monetary policy,economic growth and inflation targets as variables,then use the data from2005Q32013Q4toestablish an empirical analysis of the impaction of monetary policy to financial systemic risk,and analyzes the empirical results. RD (Rate of Benchmark Deposit) is choosed as themeasuring tool of monetary policy.The results show that the first order lags of RD’s impacton financial systemic risk is positive,but the second order lags of RD’s impact on financialsystemic risk is negative.And in the medium and long run,the impact of monetary policy onfinancial systemic risk is negative.That is when RD decrease1%,the one lags of financialsystemic risk would be reduced by about37.92%,but the second lagging phase of financialsystemic risk would rise about38.75%.And in the medium and long run,easy monetary policywill push the financial systemic risk to crease.Then we use M2as the measurement ofmonetary policy to conduct robustness test,proved that the ruslt before is correct.Finally,onthe empirical results we put forward relevant suggestions: improve the quantitativemeasurement of financial systemic risk and regular reporting system,perfect China ’s macro- prudential supervision system that match with the status quo,actively and steadily pushforward the process of market interest rates and let the market play a decisive role inallocating resources,and improve the internal firewall system not only between financialinstitutions,but also between the financial industries.