The Uncertainty Of Economic Policy And Bank Liquidity Creation Efficiency

Since the financial crisis,governments around the world have generally strengthened macro-economic regulation and control,and the uncertainty of economic policies has significantly increased.The uncertainty of economic policy will change the expectation of micro subjects and influence the overall effect of macro-control,which has been paid much attention by the academic and practical circles.As the most important financial intermediaries in China,the liquidity creation of banks is crucial to the financing of the real economy.So how will the increase of economic policy uncertainty affect the liquidity creation of banks?Based on the annual financial data of 174 commercial banks in China from 2006 to 2019,this paper establishes an individual fixed effect model to conduct an empirical study on the relationship between economic policy uncertainty and bank liquidity creation efficiency The results show that:The increase of economic policy uncertainty significantly inhibits the liquidity creation efficiency of commercial banks in China,and the inhibiting effect is more obvious for banks with no state capital background,low capital adequacy ratio and small asset scale.Structurally,EPU inhibits both on-balance sheet and off-balance sheet liquidity creation efficiency at the same time,and the effect on off-balance sheet business is more obvious.The research on the intermediary mechanism finds that the bank’s willingness to take risks is the intermediary variable of the influence of economic policy uncertainty on the liquidity creation efficiency of banks.The increase of economic policy uncertainty reduces the bank’s willingness to take risks and reduces the liquidity creation efficiency of banks.Further research shows that different types of economic policy uncertainty have different effects on the liquidity creation efficiency of banks.Monetary policy uncertainty has the most significant impact on the liquidity creation efficiency of banks,while fiscal policy uncertainty has little impact on the liquidity creation efficiency of banks.According to the current situation and the results of empirical analysis,this paper explains the phenomenon,and puts forward some policy suggestions such as stable expectations and comprehensive risk management.