A Research On The Relationship Between Banking Competition,monetary Policy And Banks' Liquidity Creation

Commercial banks plays an important role in maintaining the stable and normal operation of our economy.Liquidity creation is one of the important functions of commercial banks.Commercial bank liquidity creation means that the bank acts as an intermediary and converts high-liquid liabilities into low-liquid assets through onbalance sheet and off-balance-sheet businesses.Recent years has seen an uncertainty of the foreign and domestic economic situation,so how monetary policy affect the liquidity of commercial banks and how it work on the real ecnonomy needs attention.In recent years,the market structure and competition of banking industry in China have undergone significant changes.In the period of China 's banking reform and transformation,how the change in the level of bank competition affect bank risk-taking,thereby affecting the creation of bank liquidity need to be noticed.And how banking competition will affect the transmission mechanism of monetary policy is a question worthy of consideration and exploration by the government and the banking industry.This paper constructs a DLM framework model to derive the risk-taking channels between monetary policy and bank liquidity creation.We also introduce bank competition factor into the model to explore how bank competition affects the risktaking transmission mechanism between monetary policy and commercial bank liquidity creation.Therefore,we put up with following assumptions.In the empirical part,we use the unbalanced panel data of China's 78 commercial banks from 2007 to 2018 to construct a mediating effect model,which verifies the existence of risk-taking channels between monetary policy and bank liquidity creation.The results showed that tight monetary policy will reduce bank liquidity creation,and the increase in bank competition has a positive effect on liquidity creation.The intensification of bank competition also has a restraining effect on the risk-taking channel effect between monetary policy and liquidity creation,while the restraining effect is limited.According to the conclusions,we put up with some advice on how to make appropriate monetary policy and how to control the competition in banking system so that they provide better service for the real economy.