Research On The Effects Of Monetary Policy On Bank Risk-taking Behavior In China

That subprime mortgage crisis erupted in 2008 made the world within the scope of Banks,securities companies and real estate companies be faced with merger and reorganization,the government relief or even bankruptcy.The entire financial industry suffered a major blow,which hasn't yet fully recover till now.And when talking about what reason result in the breakout of this crisis,government and academia from the home country to abroad generally think that it is America's central bank adopting a policy of low interest rates for a long time.Low interest rates make the asset price bubble.At the same time the implementation of the securitisation of credit products lead to financial institutions having higher leverage,ultimately affect the stability of the financial system.lt is at this background that Borio and Zhu(2008)firstly put forward the bank risk-taking channel of monetary policy in one of his articles published.Since then the bank risk-taking channel of monetary policy has widely caused public concern in academic.Based on the predecessors' research model,this paper intends to study from the perspective of a new relationship between monetary policy and the bank risk-taking channel.From the perspective of the optimal and realized bank credit risk,we can easily obtain the relationship between them with the establishment of FAVAR model research.As a result,it can provide the basis for the macro-prudential regulation coordination and cooperation with the central bank's monetary policy.So this paper takes 16 relevant data of listed commercial Banks in 1999-2014 as the research sample,adopts the method of combining theory and practice of exploring the influence of China's monetary policy on bank risk bearing.This paper mainly divided into five chapters.The first chapter is introduction.At the beginning of this chapter for this article introduces the background and significance of the research,and explains the research of this paper under the background of the meaning;Then the relative literature of this study were summarized,and made a brief comment;After briefly teasing the research ideas and methods of this article,we finally draw the outline of the research framework of this article,at the same time point out several innovations and existing deficiencies which established in this paper.The second chapter is the theoretical analysis between monetary policy and the commercial bank risk-taking.This chapter mainly includes three parts,the first part is the analysis of commercial banks behavior under the conditions of the monetary policy transmission,with a focus on the commercial bank's risk-taking behavior analysis,it mainly includes the positive and negative aspects;For the second part,we tease out the macro and micro factors influencing the risk exposures of commercial Banks;In particular,this chapter mainly introduced in this paper,involving two aspects of basic theory,namely the risk transfer effect that the monetary policy and bank risk exposures were positively associated and the income of the cash flow effect,chasing interest rate effect,asset substitution effect and consumption effect,leverage effect and government advertising effect that monetary policy and bank risk-taking were inversely related.The third chapter is the determination of the optimal level of bank credit risk based on random coefficient model.With the method of empirical research,this chapter will use the collected related data of 16 listed commercial Banks in 1999-2014 to study on the relationship between monetary policy and bank risk-taking in China.The empirical analysis of this chapter is mainly composed of four parts:data and variable selection,sample selection,model setting and the analysis of the empirical test results.Among them,the first part mainly include model variable selection,namely the explanatory variables,explained variables and control variables;The second part mainly introduces the problem of sample selection;The third part mainly elaborates the problem of setting the empirical model,and through the last part we can obtain the optimal level of bank credit risk for each year,which is based on the dynamic random coefficient model.And the result of the empirical study are analyzed by means of drawing a graph.The fourth chapter is an empirical analysis between the monetary policy and bank risk-taking based on the model of the FAVAR.Through the optimal level of bank credit risk which gain from the former chapter and other concerned variables,we will do a research with the empirical model of establishing FAVAR model in this chapter.Its content mainly includes four aspects:the first part of empirical research methods used in the model are introduced,namely the principle of how to build a FAVAR model;The second part introduced the index variable selection process,including the selection of economic and attention variables;While the third part of the paper two principal component analysis was introduced in detail,and finally from a host of variables extracted out of the several common factor;For the last part,through the optimal level of bank credit risk which is obtained in the previous chapter,realized bank credit risk levels,and common factors obtained by two-step principal component analysis,we can establish a FAVAR model to go on research.Finally we can make a conclusion according to the results of the study and analyze the interpretation of the results.The fifth chapter is the conclusion analysis and policy recommendations.This part summarize full text research results,analyze research conclusion combining the reality of social economic situation and put forward the corresponding policy recommendations according to the analysis conclusion.Policy recommendations are divided into four parts:(1)the leverage ratio regulation;(2)the implementation of minimum capital adequacy regulation(3)establish a counter-cyclical macro-prudential regulation system;(4)keep the macro-prudential regulation and monetary policy coordinating;(5)accelerate the transformation of the banking industry.This article basically has two possible innovation points:firstly,the content of innovation.There are few existing literature about the impact of monetary policy on bank risk-taking,and mainly studies the influence of several specific monetary policy proxy variables on bank risk-taking,or add cross term between relevant variables in econometric model and the monetary policy proxy variable to study the influence that the related variables on the relationship between monetary policy and bank risk-taking.For example,many scholars have added cross terms between capital adequacy and the proxy variable for monetary policy in model to study the effects of capital adequacy to the relation between them.This article does not follow the former convention,and is ready to from a new angle of view to study the relationship between them,namely the perspective of the optimal and realized banking credit risk.Secondly,the methodological innovation.Through the comparison between the FAVAR model and VAR model,Bernanke(2005)found that empirical analysis of the effect for the FAVAR model is better than ordinary VAR model.Considering many advantages of FAVAR model in recent years,it is used as a frontier method for the monetary policy transmission effect.While,domestic FAVAR model introducing has just begun,and there is no FAVAR model being applied to studying the relationship between monetary policy and banking risk-taking literature.The author will fill the gaps,using FAVAR model to do a comprehensive research between monetary policy in our country and banking risk-taking.