Macro-prudential Instruments,Transmission Path And Effectiveness

Since the financial collapse of 2008,both advanced economies and emerging economies rethink profoundly the shortcomings of the traditional monetary policies and micro-prudential policies and gradually emphasize more on the application of so-called macro-prudential policies(MaPs).In 2010,representatives of BCBS unanimously agreed on The Basel ? Accord,mark:ing a milestone in the history of macro-prudential management.As for the exploration and practice of MaPs,China stands at the frontier of the world.As early as mid-2009,China started to strengthen the study of MaPs and then formally introduced Dynamic Differentiated Reserve Requirement and Consensus Loan in 2011,which was updated to Macro Prudential Assessment(MPA)in 2016.Finally,:in October 2017,China established the Dual-Pillar Framework of monetary policy and macro-prudential policy.Although China's practice of MaPs has been continuously enriched and improved,relevant theories are still very much at the developmental stage and the effect of policy implementation needs to be further studied.This paper firstly provides a systematic review of literatures related to existent classification of macro-prudential tools,policy objective and effectiveness at home and abroad.Secondly,based on a thorough analysis of the implementation process of China's MaPs,the practice effect and operation characteristics of macro-prudential tools,this paper explains the necessity of MaPs and the transmission path of liquidity-related tools,capital-related tools,credit-related tools and taxation-related tools,with the support of classical theories such as Financial Instability Hypothesis,Financial Accelerator and Bank Runs Theory.Finally,VAR model is used to study the effectiveness of macro-prudential policies,including the effectiveness of liquidity-related tools,capital-related tools,credit-related tools on credit,house price and capital inflow,the effectiveness of different types of MaPs targeting on different policy goals interacting with monetary policy andthe robust check of empirical results via the construction of China's Financial Stability Index.The key opinions of this paper are as follows:When it comes to the target goals,macro-prudential instruments has certain bias,the liquidity-related tools and capital-related tools are more effective at targeting house prices while the credit-related tools are more effective at targeting credit growth.In terms of policy effectiveness,the credit-related tools are better than liquidity-related tools and capital-related tools,after interacting with monetary policy,the effectiveness of liquidity-related instruments is weakened while that of capital-related instruments and credit-related instruments is enhanced.The Dual-Pillar framework should not only fully utilize the coordination of monetary policy and capital-related and credit-related instruments,but also pay attention to the negative effects of monetary policy on liquid-related instruments.At last,this paper also provides some reference suggestions for the practice of MaPs in China from 5 aspects.