Research On Risk-taking Channel Of Monetary Policy

When the global financial crisis spread in (he summer of2007, issue of loose monetary policy and bank risk-taking has led to a heated debate in politicians and academics. The so-called risk-taking refers to the financial intermediaries initiatively taking risks, rationally or irrationally. Some market commentators thought that the most important cause of the financial crisis is the long-term low interest rate environment between year2002to2005. In their views, banks lowered the lending standards in loose monetary policy and assumed excessive risks. Under this background, Borio and Zhu proposed the issue of "risk-taking channel of monetary policy" in2008.Issue of the risk-taking channel of monetary policy transmission is the link between monetary policy and bank risk-taking, it means the change of monetary policy would act on the perception of risk or risk tolerance of financial intermediation, thereby affecting the risk level of asset portfolio、asset pricing and the price of financing and non-price terms.(Borio and Zhu,2008).Soon afterwards lots of scholars analyzed and researched on such kind of issues, some of them did the empirical analysis for this problem, and they confirmed the risk-taking channel of monetary policy did exist in the empirical level.Research on risk-taking channel of monetary policy also has important practical significance for our country. In the environment of global financial crisis in2007, deepening of risk and uncertainty will be the general trend, although our country has experienced a less affection during this crisis. But when the degree of financial openness becomes deeper and deeper, financial regulation would also relatively relaxed, then the protection for the external environmental stimulation would gradually become weaker in our country. So, how to response to the stimulation from external environment in an economic environment which becomes more open and easing? Research in this kind of issues of risk-taking channel of monetary policy would undoubtedly facilitate the development of our country’s monetary policy making, and it was beneficial to the economic development of our country.This article mainly studies the mechanism of China’s risk-taking channel of monetary policy, expanding in both directions of banking channels and enterprise channels. In terms of banking channels, this article establishes econometric model based on microscopic financial and macroeconomic data of16listed Banks in China from2004to2013, analyses relationship between monetary policy and banking risks in China. In terms of enterprise channels, it establishes econometric model to study the effect of monetary policy to the enterprise risk with non-financial listed companies from1998to2013in China as the research object. The main conclusions of the article are as follow:(1)Before the financial crisis, banking risk-taking channel of monetary policy has not significantly demonstrated, however, after the outbreak of the financial crisis, the transmission channel’s existing is significant.(2)Monetary policy has risk conduction effect on microscopic enterprise, namely loose monetary policy will promote enterprise risk bearing, while tight monetary policy will inhibit it, risk bearing channel of monetary policy still exists on enterprise micro level.The policy implications from the conclusions are:(1)Considering the deepening risk and uncertainty, The formulation of monetary policy should take into account not only targets like inflation but also the stability of the financial system;(2)Establish multidimensional integrated risk management system composed by non-financial sector enterprises, commercial banks, central banks and supervisory authorities to avoid enterprises (including Banks) systemic risk, as a result of excessive risk-taking caused by monetary policy;(3)The establishment of evaluation system and detection system to detect the risk-taking of bank and corporate cannot be delayed anymore.