An Empirical Study Of Monetary Policy And Bank Risk-taking In China

After the global financial crisis in 2008, academics and politicians agree that the long-term expansionary monetary policy is the main cause of this crisis. Since then, many documents analyzed the relationship between monetary policy and financial stability by theoretical and empirical methods, and think that financial stability is a neglected problem in monetary policy in transmission. Aiming at this problem, scholars began to study whether the transmission of monetary policy will affects the bank risk-taking, threats financial stability, and finally affects the real economy. At present, monetary policy plays an important role in China’s macro-economic control, central bank frequently adjusts the deposit reserve ratio and benchmark interest rate in recent years. Due to the important position of banking industry in China’s financial system, it’s stability effect the safety of financial system and macro economy. So, whether central bank’s policies will affect the willingness and level of bank risk-taking, and even effect financial stability, is a worth exploring question.This paper firstly combs and summarizes the related research literatures; Secondly, analysis the mechanisms of monetary policy effect bank risk-taking, these mechanisms include valuation and income effect, search for yield effect, habit formation effect, competition effect and insurance effect, then analysis the correlation factors of monetary policy and bank risk-taking; Finally, using 32 banks’date during the period of 2006-2013 and GMM estimation method, this paper analysis the relationship between monetary policy and bank risk-taking. In addition, the sample is divided into listed and unlisted banks. According to the empirical results, this paper draws the following conclusions:(1) In China, loose monetary policy will stimulate the bank risk-taking, and bank risk-taking channel is existed. (2) The macro economy has a positive effect on bank risk-taking. When the macroeconomic situation is health, banks will improve the level of risk taking. (3) The scale, capital, liquidity and profitability of bank will affect the level of bank risk-taking, but this effect is different in listed and non-listed banks.