Research On The Impact Of Economic Policy Uncertainty On Liquidity Creation Of Commercial Banks In China

In today’s economic development,the provision and creation of liquidity plays a decisive role in production and consumption activities,and the stable and healthy development of the economy is inseparable from the liquidity created by the banking system.The world’s financial system and real economy were hit hard by the2008 financial crisis,and many of the world’s largest banks experienced liquidity crises.After the financial crisis,the relevant regulatory authorities have become more strict in supervising the indicators of banks,and introducing bank liquidity supervision indicators such as liquidity coverage ratio.Commercial banks are important intermediaries in policy transmission and leading important intermediaries in the process of capital circulation,which provide liquidity for the real economy by promoting financial integration to promote the stable development of economy.In recent years,many far-reaching events have occurred at home and abroad,and with the deepening of economic globalization,the economic development links between countries tend to be closer,and they are facing more and more fluctuations.As the world’s largest developing country,China has explored the development mode through the introduction and adjustment of economic policies in the context of the new normal of economic development and the complex development environment at home and abroad.The purpose of these policies is to reduce the negative impact of economic fluctuations,but due to the vagueness of policy direction and the constant change of policy intensity,the uncertainty of China’s economic policies has increased.Commercial banks are important intermediaries in China’s financial system,and studies have proved that various economic policies will have an impact on their business activities,and uncertainty as a second-order moment of economic policy,whether the behavior of commercial banks will be affected by it,it is very necessary to explore this issue.On the basis of summarizing the literature on economic policy uncertainty and bank liquidity creation at home and abroad,this paper sorts out the relevant literature on the impact of economic policy uncertainty on bank credit behavior and liquidity creation,and uses the balance sheet and off-balance sheet data of 154 commercial banks from 2010 to 2020 to construct the liquidity creation value of commercial banks,and empirically proves the relationship between economic policy uncertainty and liquidity creation of commercial banks.In order to make the results stable this paper also uses the dynamic panel difference generalized moment estimation method and the two-stage least squares method of instrumental variables to deal with the endogenous problem of the model.And this paper replaces the explanatory variables for robustness testing,and then analyzes the heterogeneity according to the ownership nature,capital adequacy ratio and profit level of banks.In order to explore the channels through which economic policy uncertainty affects the liquidity creation of commercial banks,this paper introduces the intermediary variable of loan provision and tests whether its intermediary effect exists.The results of this paper show that:(1)economic policy uncertainty has a significant negative impact on overall liquidity creation,of which the impact on on-balance sheet liquidity creation is more significant,but the impact on off-balance sheet liquidity creation is not significant;(2)the negative impact of economic policy uncertainty on the liquidity creation of non-state-owned banks is greater,and the impact on state-owned banks is not significant;(3)the negative impact of economic policy uncertainty on the liquidity creation of banks with low capital adequacy ratio is greater,and the impact on banks with higher capital adequacy ratios is not significant;(4)The negative impact of economic policy uncertainty on the liquidity creation of banks with lower profit levels is greater,and the impact on highprofit banks is not significant;(5)the increase in economic policy uncertainty will cause a decline in bank liquidity creation by increasing loan provisions.Based on theoretical analysis and empirical results,this paper puts forward the following policy recommendations: on the one hand,government departments should maintain policy stability,consider long-term effects and prudent decision-making when introducing economic policies;and at the same time the government should maintain smooth communication with economic entities and reduce information asymmetry;government should let the market play a major role and reduce unnecessary intervention;the government should guide commercial banks to reasonably anticipate their liquidity risks to avoid banks overestimating risks and overreacting;regulators should cooperate with government policies to regulate banking behavior and reduce the impact on their liquidity creation functions;on the other hand,banks should improve the effectiveness of policy identification and the ability to deal with liquidity risks,avoid the excessive impact of rising economic policy uncertainty,and they also should improve management capabilities and operational efficiency in combination with their own characteristics,take into account the safety,profitability and liquidity of bank operations,serve the development of the real economy better.