Research On China's Monetary Policy Risk-taking Channel

Monetary policy is the process by which the monetary authority of a country controls either the cost of very short-term borrowing or the monetary base to achieve policy objectives.Many researches on the transmission mechanism of monetary policy focus on the analysis of the adjustment mechanism of monetary policy on the behavior and output of market participants,and less on the impact of monetary policy on the risk of market participants during the implementation process.After the outbreak of the financial crisis in 2008,some scholars considered that excessively loose monetary policy,such as the long-term low interest rate level,was one of the major causes of the crisis.Therefore,the academia began to re-examine the current monetary policy transmission mechanism and target system.Many scholars have found that a relaxed monetary policy environment will significantly increase the risk perception or risk tolerance of market entities such as banks and enterprises,and then increase the risk exposure level,and define it as a monetary policy risk-taking channel.In recent years,China has consistently implemented a steady and loose monetary policy.While achieving some objectives such as promoting economic development and full employment,it may have a negative impact on risks of commercial banks,corporate and other market participants.Therefore,it is necessary to thoroughly study the impact of monetary policy on banks and corporate risk-taking,and provide certain reference for improving the formulation and optimization of monetary policy.This paper combines theoretical analysis and empirical analysis to study the risk-taking channel of monetary policy through the conduction path of “central bank-commercial bank-corporate”.After reviewing relevant literatures and summarizing relevant theories,this paper establishes some mathematical models.Based on the theoretical analysis,this paper establishes a panel data model by using the annual data of China's commercial banks and listed companies from 2006 to 2016 to study the impact of China's monetary policy on commercial banks and corporate risk-taking.It has been found that China's monetary policy has significantly affected the risk-taking of commercial banks and corporates.Loose monetary policy stances will significantly increase the level of risk-taking of commercial banks and there will be a threshold effect based on the level of bank capital.Banks with low capital levels will have a higher level of risk-taking.Loose monetary policy will also significantly increase the level of risk-taking of commercial banks and there will be a threshold effect based on the scale of assets.Small corporates will have a higher level of risk-taking.Finally,this paper puts forward a series of suggestions from four aspects: macro-prudential regulatory,bank capital supervision,SME development,and risk assessment.