Examination On China’s Two Stage Risking

Because of the global financial crisis beginning in 2007,the federal reserve’s loose monetary policy since 2002 triggered the academic criticism. Moreover, this risk also encouraged scholars to begin the research about the relation between monetary policy and financial stability. People gradually started a new research to expand the objectives of monetary policy and review the theory of monetary policy’s transmission.What’s more, the "Risk-taking Channel", which is put forward by Borio & Zhu in 2008,became the center of the new research. Due to the lower financial Openness and the stricter financial regulation, our country is less affected by this crisis. However, With the deepening of the globalization and the relaxation of the financial regulation in our country, the research about "Risk-taking Channel" will have a strong theoretical and practical significance.Based on the review of the existing literature, the paper will be divided into following six parts to study the risking-taking channel:The first part is the introduction, which includes the background of the article, the significance of the topic, the overall arrangements and its creation and shortcomings. The second part is the summary of the literature about the risking-taking channel. This part concisely introduces the traditional monetary policy transmission theory and reviews the theory of the existing literature about risking-taking channel. Then this part put forward the two stage risking-taking channel, which take the influence of bank risk taking on bank credits into account. The third part involves in three aspects including the theory mechanism of the risking-taking channel and the contributing factor to the channel. The fourth part mainly constructs econometric model to examine the existence of the two stage risking-taking channel and the selectivity of risk-taking behavior for bank. Besides, this part also states the selection of the sample, the selection of the index and the source of the data. Furthermore, this part makes detailed statistical analysis based on the sample data. The fifth part is empirical study, establishing a dynamic panel with the micro data of 16 listed banks in China during 2004-2014 and the macro data for during the same period. Moreover, this part use the differential GMM estimation method to carry out the on the regression, and make the reasonable interpretation. The last part makes the conclusion, then it gives some suggestions according to the relevant empirical study and the existing literatureBy reviewing the existing literature of risking-taking channel and doing empirical research, we get the following results:(1)Generally speaking, the two stage risking-taking channel is exist and the channel is affected by the macro economy and the microscopic characteristics of Bank.(2)The risk-taking behavior for bank will be manifested both in asset and liability. For the first stage, where monetary policy affects the risk-taking behavior for bank, the loose monetary policy will stimulate banks to assume more risk asset and less risk liability; For the second stage,where the risk-taking behavior for bank affects the bank credits, the higher level of risk asset will stimulate banks offer more bank credits,but the affect is the opposite when it comes to the risk liability.