Analysis Of The Influence Of China's Shadow Banking On The Effectiveness Of Monetary Policy

The direct cause of the outbreak of the international financial crisis in 2008 was the risk exposure and lack of supervision behind the rapid growth of shadow banking.Shadow banking has gradually become the focus of global research.China's shadow banking exists as a commercial bank and cooperates and competes with commercial banks.The shadow banking products have the characteristics of high yield,strong liquidity,and strong liquidity.Commercial banks are diverting funds to shadow banks under the trend of profit-seeking incentives to obtain high returns,resulting in the reduction of excess reserve for commercial banks.The rich,high-yield investment tools of shadow banking absorb household savings and reduce the public's holding of currency to lower the base currency.At the same time,shadow banking is an indirect financing institution.In view of the increase in the level of the financial media,the high interest rate characteristic drives the rise in market interest rates.Therefore,shadow banking affects the effectiveness of China's monetary policy from the perspective of impacting excess reserves,base currency,and interest rates.In recent years,the scale of China's shadow banking has increased year by year.According to China's shadow banking data released by Moody's,the scale of shadow banking from 2011 to 2016 rose from 19.2 trillion to 64.5 trillion,with an average annual growth rate of more than 47%.Behind the rapid increase in the scale of shadow banking,issues such as increased leverage,hidden funds transfer,and capital violations are gradually exposed,which has attracted the attention of regulatory authorities.On September 30,2016,the China Banking Regulatory Commission issued the "Guidelines for Comprehensive Risk Management for Banking Financial Institutions." On October 13,216,the General Office of the State Council promulgated the "Implementation Plan for Internet Finance Risk Special Renovation" to carry out special rectification of Internet financial risks.Under strong supervision,the growth of shadow banking was curbed.Moody's data shows that the ratio of shadow banking to GDP fell from 86.5% in 2016 to 82.6% as of June 30,2017.As of the end of June 2017,the shadow banking industry's assets reached 64.7 trillion yuan,which accounted for about 27% of the total assets of the banking sector,but it only increased by 0.5% compared to the end of 2016.In December 2017,the China Banking Regulatory Commission issued the Circular on Regulating the Bank's Banking Business.On January 5,2018,the China Banking Regulatory Commission issued the Measures for the Administration of Entrusted Loans of Commercial Banks.The specific implementation effects need further observation.This article focuses on the study of the impact of China's shadow banking on the effectiveness of monetary policy.First of all,the paper summarizes the development of shadow banking,the effectiveness of monetary policy,and the effectiveness of shadow banking on the effectiveness of monetary policy.Second,the concepts of shadow banking in China are analyzed.Defining and introducing its characteristics and the motives behind it;and then,in accordance with the theoretical perspective of the role of shadow banking on the transmission channels of monetary policy,intermediary targets,and ultimate goals,we will follow the monetary policy transmission mechanism to elaborate the impact of China's shadow banking on the effectiveness of monetary policy;Based on the previous literature,we introduced the representative p2 p online lending in internet shadow banking into the Tvp-Var model to study the effect of shadow banking on the output channels of China,the price channels,and the supply of intermediate targets to determine the shadow banking pair.With the effectiveness of monetary policy,GDP and CPI are introduced into two groups of data in order to obtain pulse patterns with time-varying and sudden changes.Through empirical analysis,China's shadow banks have strengthened the effectiveness of monetary policy in the output channels,weakened the effectiveness of monetary policies in price channels,and indirectly proved that shadow banking weakens the effectiveness of monetary policies from the perspective of shadow bank's influence on money supply.Finally,in light of the above issues,suggestions are made from the perspectives of strengthening supervision,preventing risks,and perfecting the transmission channels of monetary policy,regulating the development of shadow banking in China and improving the effectiveness of monetary policy.