The Impact Of Central Bank Communication On Financial Institutions’ Systemic Risk Spillovers

As an effective tool of macro-control,central bank communication plays an important role in guiding market expectations and improving the efficiency of monetary policy control.At present,global economic growth has weakened significantly,inflation is high,geopolitical conflicts are continuing,and the external environment continues to be volatile.China’s economic development is faced with the triple pressure of "demand contraction,supply shock and weakening expectations".The foundation for economic recovery is not yet solid,and the impact on the Chinese economy is deepening.Therefore,in order to prevent the impact of external black swan events on the financial market and prevent internal and external risks from intermingling and amplifying,forming systemic financial risks,the research on the influence of central bank communication on the spillover of systemic risks of financial institutions is conducive to improving the regulation efficiency of central bank communication and achieving the goal of financial stability.This thesis adopts the text mining method and uses the Chinese financial sentiment dictionary to analyze the text of the monetary policy implementation report publicly released by the People’s Bank of China.By calculating the multi-dimensional text indicators such as text sentiment,text similarity and text readability of the report,the central bank communication index is constructed based on the text sentiment of the monetary policy report.At the same time,taking the domestic financial industry and its sub-industries and financial institutions as the research sample,using the daily closing price from August 1,2011 to October 31,2022 as the research data,on the basis of measuring the Va R of the sample systematic risk,the DY model is used to measure the risk overflow of the sample.Finally,the impact of the central bank communication index reflecting the sentiment of the report text on the risk spillover of financial institutions is analyzed and discussed.Research shows that major macroeconomic and financial events will significantly affect the textual sentiment of the report.In the transmission of financial market volatility in our country,the securities industry is at the center of network in the directed acyclic graph,which is the source of infection in the same period.In the aspect of risk spillover between financial industries,the risks of financial sub-industries such as state-owned banks,joint-stock banks and insurance are relatively large,so efforts should be made to prevent their transmission to our financial system.In terms of the risk of financial institutions,the overall risk of financial institutions in our country is easily affected by important events that cause changes in market environment.In terms of the risk contagion network of financial institutions,Xinli Finance,as the center of the connected network,will significantly increase the risk spillover effect to other financial institutions if its risk fluctuates sharply.In terms of the impact of central bank communication on the systemic risks of financial institutions,the impact of central bank communication index on the risks of the whole financial institutions and the financial industry is mainly derived from the text sentiment of the central bank’s forward guidance.Further research shows that the text sentiment communicated by the central bank can significantly promote the risk spillover of the financial industry and financial institutions.For financial institutions in various industries,the text sentiment has different impact on the risk spillover of financial institutions in different industries,while the part of the report text sentiment reflecting the future monetary policy and guidance will promote the risk spillover of financial institutions in the financial industry and its sub-industries.In terms of policy recommendations,first of all,from the perspective of financial industry,our country should focus on the impact of risks in state-owned banks,joint-stock banks,securities and other financial subsectors,especially the securities industry and trust industry as the risk network center,and strive to prevent the transmission of risks in financial subsectors to our country’s financial system.Secondly,from the perspective of financial institutions,comprehensive macro-prudential supervision should be strengthened for financial institutions at the center of the risk contagion network,so as to control their risks within a reasonable range as far as possible and prevent the sharp fluctuations of their risks from spreading to other financial institutions.Finally,the communication of China’s central bank is effective.The relevant regulatory authorities can better convey policy intentions and guide market expectations through communication,so as to prevent financial systemic risks and their spillovers.