Risk-taking Channel And Liquidity Analysis Of Monetary Policy Transmission

The efficiency of monetary policy transmission is the key to whether monetary policy can play a role in promoting healthy economic development.Since the financial crisis,the risk-taking behavior of commercial banks has inspired extensive discussions and contributed to the foundation of risk-taking channel for the transmission of monetary policy.Based on the D-L-M model,this paper introduces the ratio of financial liabilities to total liabilities and expands the original model to analyze the impact of monetary policy on the risk-taking behavior of commercial banks.Monetary policy and the risk-taking behavior of commercial banks are correlated with each other through three kinds of effect: the risk-shifting effect,leverage effect and pass-through effect.The model indicates that there is a threshold of financial liabilities ratio.When the proportion of bank financial liabilities is lower than the threshold,loose monetary policy reduces the level of bank leverage and risk.When the proportion of bank financial liabilities is higher than the threshold,loose monetary policy increases the level of bank leverage and risk.Then,using the quarterly dataset of banking sector from 2009 to 2018 and the annual dataset of 15 listed commercial banks in China from 2007 to 2018,by the means of the feasible generalized least squares method(FGLS)and the dynamic panel data generalized moment(GMM)method,respectively,the paper verifies the existence of risk-taking channel for monetary policy transmission.Finally,through the case study of “money shortage” and “asset shortage”,the monetary policy formulation and financial supervision are linked,and suggestions such as deepening the interest rate marketization reform,standardizing the development of inter-bank business,improving liquidity monitoring indicators and strengthening coordination of different policies are proposed.