Shadow Banking,Financial Regulation And Effectiveness Of Monetary Policy

Although China’s shadow banking started late,with the continuous emergence of financial innovation,shadow banking has developed rapidly in terms of system,form,and scale.The shadow banking system has become an important part of the financial market that cannot be ignored and has far-reaching impact.According to Moody’s calculation,China’s total volume of shadow banking credit growth in 2016 was 21%,with a scale of 64.5 trillion yuan,equivalent to 87%of GDP.After undergoing strict deleveraging and risk supervision since 2016,the size of shadow banking has shrunk to 61.3 trillion yuan,accounting for 68%of GDP,and its role cannot be underestimated.Unlike the competitive relationship between European and American shadow banks and commercial banks,China’s shadow banks present a significant "banks centric" feature,which is the "shadow"of the commercial banking system.The particularity of this structure has transformed the transmission of monetary policy,macro-prudential policy and policy effects,with the financial system as the main target.Based on the realistic characteristics of the rapid growth of China’s shadow banking system in recent years,this paper establishes a DSGE model that introduces the shadow banking sector,analyzes the impact of shadow banking on stable economic growth and monetary policy transmission efficiency,and focuses on evaluating the macroeconomic policies of wealth management subsidiaries effect.The study found that:(1)Strict financial regulation will lead to the expansion of shadow banking scale,and commercial banks have regulatory arbitrage behavior.Only the capital ratio requirements cannot effectively curb shadow banking asset expansion.(2)On the one hand,shadow banking makes up for the shortcomings of traditional credit,meets the financing needs of the real economy,suppresses the fluctuation of the total amount of social financing,and plays the role of a financial buffer;on the other hand,shadow banking serves as the "shadow of the bank"The inherent financial friction has created a financial accelerator mechanism that amplifies economic fluctuations.(3)Shadow banking has caused partial replacement of credit channels that function through traditional commercial banks,resulting in leakage of monetary policy,undermining the effectiveness of monetary policy credit channels,and reducing the stable regulation of monetary policy on output and inflation.(4)The new rules on asset management promote the transformation of shadow banking to wealth management subsidiaries.The focus of this policy is on risk isolation.By constructing a DSGE model with risk isolation characteristics,simulations have found that risk isolation can effectively control regulatory arbitrage,eliminate monetary policy leakage and inhibit the rapid expansion of the shadow banking system.On the other hand,in the context of the epidemic crisis,supply and demand have shrunk dramatically,and the international financial market has been volatile.Risk isolation,while suppressing the shadow banking system,causes a decline in the scale of social financing and a downturn in investment,magnifies financial and macroeconomic volatility,and reduces economic stability.