| The financial system is the core of modern economy, maintaining financial system stability is the basis for the healthy development of the national economy, and it is the premise of global economic growth. As the vitality of the financial system, liquidity plays a crucial role in trading, pricing and other functions. A series of financial crisis show that the dynamic effects generated by the liquidity shock will not only lead to bankruptcy of enterprises, but also seriously damage the stability of the whole financial system and cause huge losses to the national economic growth.In order to clearly explore the dynamic effects of liquidity shock on financial system stability, the ideas of "cause-pathway-model and empirical research-countermeasure" is submitted. First of all, the endogenous causes of the dynamic effects are divided into two categories:the change of liquidity cycle and the switch of liquidity state, and separately theoretical descriptions come next. Secondly, four kinds of diffusion paths:the asset price channel, the balance sheet channel, the international channel and the psychological expectation channel are classified, and further divided them into ten kinds:physical asset price channel, financial asset channel, credit contagion effect, leverage procyclicality, due of the off-balance sheet business, international hot money flow, the monsoon effect, pure contagion effect, bank-run effect and herding effect. Then the dynamic effects of liquidity shock on the financial system stability are split into three categories:the spillover effect, the periodic linkage effect and the multiplier effect. For the spillover effect, a financial system stability index is built using factor analysis method. And then the empirical analysis of the spillover effect of stock market liquidity, bond market liquidity, fund market liquidity, inter-bank market liquidity, monetary liquidity and national debt liquidity in China is taken by SVAR model. Results show that the spillover effect of monetary liquidity shock and stock market liquidity shock are most significant. In the respect of the periodic linkage effect, the method of single spectral analysis is adopted to find that liquidity cycle in our country is composed of a 5.42-year main cycle and a 5.37-month minor cycle, and financial cycle is composed of a 3.61-year main cycle and a 3.66-month as well as a 3.82-month minor cycle. Applying cross spectrum analysis, liquidity cycle and financial cycle exhibit the most consistent in 6-month periodic component, and liquidity cycle changes prior to financial cycle and impacts greatly in long periodic component. In the respect of multiplier effect, a mathematical model to describe the multiplier effect of liquidity shock on financial system stability is established, introducing five parameters:deposit reserve rate, deposit rate, lending rate, the probability of default and collateral liquidation rate. Through taking the actual data into the model, it funds that the liquidity multiplier in our country is smallest, while in Japan and Germany the liquidity multiplier is higher. Simulating and analyzing the effect of each parameter on the liquidity’ multiplier effect follows. Finally, some relevant policy suggestions according to the above research conclusions are given. |
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