The Impact Of Monetary Policy Shocks On Deleverage Under Bank Competition

Facing a series of complicated economic shocks both internally and externally at present,it is of great significance for China to seek the stable and reasonable level of financial leverage.Controlling the leverage of economy on the basis of ensuring financial stability and the overall sustainable development of the real economy,is an important function of macro-control of monetary policy under the new normal.According to the SCP analysis paradigm,market structure of banking industry determines how Banks respond to monetary policy shocks.The response of Banks loan behavior to monetary policy shocks plays an important role in the effect of monetary policy on economic leverage,which is what the bank credit channel of monetary policy pays attention to.This paper investigates the impact of bank competition on the response of financial leverage to monetary policy shocks from both macro and micro levels.Based on this topic,we put forward two hypotheses.Hypothesis 1 sets under the general equilibrium framework of commodity market,and assumes that monetary market and loan market in the IS-LM-CC model,and assuming that the improvement of bank competition weakens the marginal effect of monetary policy on the financial leverage ratio through bank asset expansion.Hypothesis 2 suggests that,considering the mortgage abilities from heterogeneous enterprises,the friction in credit market changes as the relative proportion of two types of enterprises in the economy changes.Therefore,the impact of monetary policy to financial leverage changes accordingly,and also the marginal effect of banking competition on monetary policy effectiveness.Then the empirical part made systematic analysis by using the domestic quarterly data from 2007 to 2017 and panel data of 566 listed enterprises.Starting from the macro level,VAR model is used to calculate and compare monetary policy effect under two conditions,which is including and excluding bank competition variables separately.And crosschecks are done for robustness,first calculating the impact of monetary policy on financial leverage,and observing the correlation between bank competition and the impact of monetary policy through regression scatter diagram.Second investigating the results from tightening and expansion periods of monetary policy based on subsamples.Moreover,considering that different types of firm's debt ratios responds differently to monetary policy shocks,we study from the micro level.Because of the asymmetry of expansionary and tightening monetary policy,nonlinear threshold regression model is adopted.Furthermore,the structural analysis at the enterprise level is made based on panel.The impact of monetary policy through bank credit channel is sensitive to the distribution of different types of enterprises.The differentiated distribution characteristics of heterogeneous corporate debt ratio in response to monetary policy shocks are examined from these aspects,property rights structure,enterprise size,enterprise capital ratio,liquidity ratio and profit margin.Results suggest that,the long-term effect of bank competition is uncertain,yet it magnifies the effect of monetary policy to regulate the economic leverage ratio through bank credit channel in the short term.This amplification effect of bank competition on the response of economic leverage ratio to monetary policy is mainly caused by the influence of bank assets expansion,which is closely related to the profit structure mechanism of Banks in Chinese specifically.Heterogeneity characteristics of enterprises have different impacts on monetary policy effect,while the marginal effects of bank competition on those impacts also show some different.The degree of bank competition has an asymmetric impact on the tightening and expanding monetary policies,but it does not affect the conclusion in the average sense.It reveals that it is important to take the credit supplement into consideration as the systematic bias of corporate investment in the economy.