How Does Monetary Policy Affect The Liquidity Creation Of Commercial Banks In China?

Liquidity creation refers to the process in which a commercial bank converts the liquid liabilities in the balance sheet into the illiquid asset,or converts off-balance sheet liquid asset into the committed credit facilities,other contingent liabilities and so on.The more liquidity a commercial bank creates,the more the liquidity is transformed,and the more likely it is to generate liquidity risk.According to the monetary policy bank credit transmission channel theory,monetary policy can affect the liquidity of commercial banks by affecting the deposits and loans of commercial banks.Therefore,studying the impact of monetary policy on the liquidity creation of commercial banks is of great significance both to the management of liquidity risk of commercial banks and the implementation of central bank monetary policy.This paper mainly includes five parts,the specific contents are as follows:The first part briefly expounds the research results of domestic and foreign scholars on the liquidity creation of commercial banks,providing a theoretical basis for empirical research in this paper.The second part is to discuss the economic theory related to monetary policy,and lay a theoretical foundation for the analysis results of this paper.The third part calculates and analyzes the liquidity creation value of the sample commercial bank from 2011 to 2017.The fourth part uses the generalized moment estimation(GMM)dynamic panel model to estimate the relationship between monetary policy instruments and bank liquidity creation.The fifth part puts forward some policy recommendations to commercial banks and central banks based on the research results.The empirical analysis of this paper shows:(1)Monetary policy has a significant impact on bank liquidity creation,and different monetary policy instruments have different effects on the liquidity creation of commercial banks.A tightening monetary policy that reduces the growth rate of broad money M2 or raises the bank's 7-day interbank lending rate will increase bank liquidity creation,implementing a one-year lending benchmark interest rate or a statutory deposit reserve ratio tightening monetary policy will reduce bank liquidity creation.(2)M2 growth rate is significantly negatively correlated with on-balance sheet liquidity creation and off-balance sheet liquidity creation of bank;Bank 7-day interbank offered rate is significantly positively correlated with on-balance sheet and off-balance sheet liquidity creation of bank;Benchmark interest rate for one-year loans is negatively correlated with the bank's on-balance sheet liquidity creation,is positively correlated with the bank's off-balance sheet liquidity creation.The statutory deposit reserve ratio is the same as that.)3)The bank's asset size,non-performing loan ratio,and capital adequacy ratio are positively related to its liquidity creation.GDP growth rate,consumer price index are also positively related to bank's liquidity creation.(4)The impact of monetary policy on the liquidity creation of commercial banks is affected by the size of commercial banks'assets.The larger the size of commercial banks,the smaller the impact of monetary policy such as the statutory deposit reserve ratio and the one-year lending benchmark,the larger the impact of M2 growth rate.Comprehensive research results,propose policy recommendations:(1)The People's Bank of China should be based on the current economic environment,clarify the relationship between different monetary policy instruments and bank liquidity creation,implement the corresponding monetary policy,and exert the maximum effect of monetary policy.(2)Commercial banks should consider the relationship between their own characteristics,macroeconomics and liquidity creation,effectively manage their asset and liability structure,and scientifically adjust their liquidity creation level.(3)For commercial banks of different sizes,the central bank should consider the impact of monetary policy on different types of commercial banks,implement differentiated monetary policies,and give full play to the role of monetary policy.