The Empirical Research Of Shadow Banking Liquidity Creation And It’s Effects

With the rapid development of financial innovation and the financial disinter-mediation, the structure of financial market is plural. The shadow banking has become a new marketing mode of China’s financial industry in recent years, it is a kind of financing way which contain traditional banking functions,but it’s mode of operation is completely different from the traditional bank financing, it’s development is the result of continuous game between financial institutions and government departments. But with the shadow banking scale rapid expansion, the impacts to the Economic system have gradually emerged, development of the shadow banking has been a serious threat to the financial stability in China, so the research on shadow banking is of great urgency. But from the domestic and foreign literature, they put more attention on the definition and the risks of the shadow banking, lay more stress on strengthening the shadow banking supervision, as for the shadow banking with Chinese characteristics, it is lack of shadow banking liquidity creation mechanism and the effect of liquidity on macro economy. This paper analyzes the mechanism of shadow banking liquidity creation, studies its impact on China’s economy from an empirical point of view, then gives the conclusion and the corresponding suggestions. This paper has four chapters:In the first chapter, this paper introduces the background and significance of the topic, and briefly elaborates some important research results and research idea of the domestic and foreign literature in related fields, then states the study methodology and the structure.In the second chapter, this paper mainly analyzes the development process of shadow banking, the general mechanism of the shadow banking liquidity creation, make a comparison of the liquidity creation of the commercial banks. The liquidity creation of commercial bank is realized by the operation of its own balance sheet, that is to say, transfer liquid liabilities to non-liquid assets, which provide credit support to the public. While the shadow banking transfer market liquidity into banks’ liquidity through asset securitization. It is financing by the issuance of securitized products, commercial paper in the short-term money markets, then buy assets in the owe the liquidity of the market for a long time. Then, it mainly introduces the comparison of shadow banking between American and China. Because of the different phases of the financial market environment and development, we should not make a simple comparison of the shadow banking and their liquidity creation mechanisms. In the light of the shadow banking phenomenon with Chinese characteristics, we should flow from its creation mechanism to grasp the essence of shadow banking in China.In the third chapter, it does an empirical analysis. This paper empirically study the liquidity creation of shadow banking, it’s influences on the macroeconomic in China and make a comparative analysis with bank credit by using the VAR model and impulse response function, selecting the liquidity of shadow banking, bank credit and economic growth as the main indicator, according to the monthly data from January2007to December2012.The last part is the fifth chapter, this paper mainly brings up the conclusions and proposes the corresponding suggestions. The empirical results show that:since2007, shadow banking liquidity creation plays a positive role in China’s economic growth; it has a large fluctuation and a certain negative effect on economic growth in the short term, but it tends to be stable in the long run. Therefore we put forward the following suggestions:make a correct understanding of the shadow banking, guide the healthy development of the shadow banking; strengthen the consciousness of liquidity risk prevention and the liquidity management; mitigate the procyclicality of shadow banking; make a moderate monitor on the shadow banking. Therefore, Supervisory authorities should guide the development of the shadow banking actively, exert the positive impacts on macro economy, strengthen the management of the liquidity risk of shadow banking at the same time.