The Impact Of Innovative Monetary Policy Tools On Market Liquidity In China

Under the background of increasing uncertainty of global economic development,there are also different levels of problems in China's financial market.From 2014 to2016,the amount of foreign exchange reserves decreased and the RMB exchange rate continued to decline in foreign exchange market.The stock disaster in 2015 and the suspension of circuit breaker mechanism in 2016 also reflect that the liquidity of China's stock market has some problems in both emotional and institutional aspects.In2013,there is a liquidity crisis in China's interbank market which means structural bubbles exist in China's interbank market liquidity.The reduction of foreign exchange reserves means the reduction of the amount of foreign exchange occupied,and the decrease of the range of foreign exchange occupation will lead to the shortage of money supply.The occurrence of the stock disaster means that there are great problems in the liquidity of the stock market.Money shortage also shows that the efficiency of money supply is at a relatively low level.A large number of money does not flow into the real economy,but carries out idle arbitrage in the financial market,which in a sense leads to the structural shortage of market liquidity.This requires that the regulation of monetary policy should not only pay attention to the supply of money quantity,but also consider the structural adjustment,so as to make the investment of funds more accurate and effective.At the same time,China's monetary policy transmission mechanism under the guidance of traditional monetary policy tools is not perfect.The interest rate transmission mechanism and asset price transmission mechanism in the theory of monetary transmission mechanism have not been well practiced in China.Therefore,China needs to start from the tool side and use some innovative monetary policy tools to solve these problems.This paper analyzes the impact of innovative monetary policy on market liquidity from qualitative and quantitative perspectives.The first step is to sort out the relevant literature of innovative monetary policy tools from both foreign and domestic perspectives to clarify the significance and purpose of this paper;the second step is to describe the characteristics,application history and current situation of innovative monetary policy tools;the third step is to define market liquidity indicators according to the three-dimensional theory of market liquidity,and divide market liquidity into interbank market liquidity,stock market liquidity and foreign exchange marketliquidity,and select the corresponding indicators according to different market liquidity.The fourth step analyzes the transmission mechanism of monetary policy,and explains the transmission process of monetary policy from the theoretical level.Finally,the Granger causality analysis and impulse response methods in VAR model are used to test the impact of innovative monetary policy tools on market liquidity This paper analyzes whether the existing innovative monetary policy tools can effectively regulate market liquidity.This paper finds that in the aspect of interbank market liquidity,innovative monetary policy instruments such as medium-term lending facilities have a certain degree of impact.Specifically,in terms of inter-bank market liquidity and stock market liquidity,the medium-term loan facility has the most significant impact.In the foreign exchange market liquidity regulation,the standing loan facility has a better effect,while the short-term liquidity adjustment tool has no obvious effect on the liquidity of each financial sub market.Finally,according to the analysis of the conclusions obtained in the empirical process,the corresponding policy recommendations are given.First of all,according to different market conditions and financial institutions,use different monetary policy tools to operate.Secondly,in view of the liquidity stratification phenomenon in China's banking system,we can expand the scope of trading objects and collateral of innovative monetary policy,and better alleviate the liquidity risk problems of small and medium-sized banking system.Thirdly,we should strengthen the cooperation with the traditional monetary policy tools,learn from each other's strengths to better regulate the market liquidity.Finally,we can consider including the foreign exchange market liquidity and stock market liquidity related indicators into the goal of monetary policy operation.The monetary authority can use these indicators to adjust the liquidity of different markets better.