Research On China's Central Bank Liquidity Support And The Corresponding Decision Support System

Seven years after the global financial crisis broke out,the world economy is still in deep reconstruction period.Economic recovery is still slow and tortuous.As a result,the global financial market experienced significant fluctuations.In the meantime,as the Chinese economy entering the “new normal” stage,it is faced with significant downward pressure and increasingly sophisticated financial environment.In this situation,it is becoming more important than ever to stabilize the financial market and support healthy development of the real economy.It is important for central banks to enhance liquidity support and seek for computer aided decision making in liquidity provision using liquidity support decision making system,which my ameliorate their liquidity management and improve the effectiveness of liquidity support,with the purpose of tackling systemic financial crisis and maintaining the China's financial stability.The analytical framework of this dissertation is as follows: Theoretical Analysis— Liquidity Measurement — Liquidity Risk Early Warning and Liquidity Support Timing — Liquidity Support Tools — Liquidity Support Transmission Mechanism —Overal Design of the Decision Support System— International Comparision — Policy Recommendation”.Under the guidance of liquidity support theories and decision support theories and utilizing such techonologies and tools as computer technology and statistical analysis,this dissertation studies such problems as liquidity measurement,liquidity risk early warning and liquidity support timing,liquidity support policy tools and evaluation as well as liquidity support transmission mechanism,and,drawing on experiences from other countries,offers relevant policy recommendations such as improving liquidity coordination mechanism and information sharing platform,ameliorate laws and institutions,improving liquidity management of central banks,etc.First,this dissertation gives definitions to important concepts.The “central bank liquidity support” in this dissertation is defined as emergency liquidity provision provided by central banks to financial systems in liquidity crisis or temporarily illiquid but solvent financial institutions,to tackle with systemic financial crisis.“Decision support system” is defined as an information system that helps administrators deal with complex information to give them a hand in decision makingprocess.It is interdisciplinary in nature integrating computer science,artificial intelligence,economics and management,and so on.It is often composed of data warehouse,model base system,knowledge base system,data warehousing tools and interactive systems.Second,The dissertation studies the problem of liquidity risk early warning and liquidity support timing,establishing CRMG model and Main Component Analysis model to measure the liquidity level of financial system and financial institutions respectively,and then performs the liquidity risk early warning task using Ordered Logic model and results from liquidity measurement.It then establishes three degrees of liquidity insufficiency after eastablishing normal fluctuation range of liquidity level to determine the right timing for liquidity support.Liquidity risk early warning provides the yardstick for liquidity support.Third,the dissertation studies the monetary policy tool selection for central bank liquidity support and policy evaluation associated with it.Following the comparative study on traditional and new liquidity support tools as well as theoretical analysis on the effectiveness of these tools,the dissertation studies liquidity support tool combinations under different monetary policy environments,and carries out empirical analysis using the VAR model to analyze the effectiveness of monetary policy tools.Fourth,the dissertation studies the transmission mechanism central bank liquidity support.This study provides for intermediate variables for central bank liquidity support operations and can help improve the effectiveness of liquidity adjustment.Finally,this dissertation establishes the liquidity support decision support system based on the abovementioned study,which is composed of data warehousing,knowledge base system,model base system and other data mining tools.This system is capable of collecting,storing,analyzing and processing large amounts of financial data.Of this,data warehouse offers data query service and provides data necessary for use by model base system and knowledge base system.The model base system stores and manages models in liquidity measurement,liquidity risk early warning,monetary policy tools and monetary policy transmission,and feedbacks the results to the users after finishing the quantitative analysis.The knowledge base system carries out qualitative studies using expert knowledge from various fields,which can improve the scientificity and effectiveness of decision making.The main purpose of this dissertation is to improve the scientificity andeffectiveness of central bank liquidity support using decision making system technologies,but is unable to develop a fully fledged software system.Future research on this subject may include the following:(1)futher study on the implementation details of the system,including coding and software testing.Application of more advanced IT technologies like more sophisticated artificial intelligence system or big data is also needed for enhancement of computer aid decision making in the area of liquidity support and management.(2)more in-depth study in the theory and practice of liquidity support,to keep the timeliness of the research.