Research On The Financial Stability Effect Of My Country’s Macro-prudential Policy Tools

The 2008 financial crisis fully demonstrated the importance of macroprudential regulation to maintain financial stability.macroprudential policy supervision relies on macroprudential policy tools.Some scholars have proposed that the lack of macroprudential policy tools in the regulatory system is an important reason for the crisis.During the decade from 2010 to 2020,although China’s macroprudential policy framework has been gradually improved and its macroprudential policy’s toolbox has been continuously enriched,Systemic risk accumulation is still evident.For one thing,the use of macroprudential policy tools in China focuses on the simultaneous use of all or more tools,which makes it difficult to control the scale of interaction between tools,exacerbating the volatility of the financial system,for another,China’s macroprudential policy framework may still have some imperfections,contributed to the vulnerability and risk accumulation.In this context,it is of great significance to improve China’s macroprudential policy framework to explore the financial stability effect of China’s macroprudential policy tools and clarify which kind of macroprudential policy tools are most effective in regulating financial markets.On the basis of existing literature,this paper analyzes the financial stability effects of credit,capital and liquidity macro-prudential policy tools from a unified framework,and analyzes the theoretical mechanisms of the three types of macro-prudential policy tools.On this basis,the financial stability index is constructed and SV-TVP-FAVAR model is established to test the financial stability effect of macro-prudential policy tools in China.Through theoretical mechanism and empirical analysis,this paper draws the following conclusions :(1)liquid macro-prudential policy tools have the effect of maintaining financial stability in the long run.(2)Capital and credit macro-prudential policy tools only have short-term effects,and the regulation effect of the former is very violently.(3)Monetary policy instruments also have financial stability effect,and the regulation effect is getting bigger and bigger as time goes by,but the effect of financial stability is not as good as that of macro-prudential policy tools in the short term.Based on the above conclusions,this paper puts forward the following policy suggestions from two perspectives: improving China’s macro-prudential policy framework and selecting macro-prudential policy tools rationally:(1)Using liquid macro-prudential policy tools as the main category,appropriately increasing the capital category and moderately reducing the regulation of credit macro-prudential policy tools.(2)Actively promote the design and research of long-term macro-prudential policy tools.(3)Accelerating the establishment of China’s macro-prudential policy database.(4)Strengthen oversight of systemically important financial institutions.(5)Include more sectors related to the real economy in the macro-prudential policy framework.