The Impact Of Shadow Central Bank On China’s Financial Stability

As the growth rate of foreign exchange outstanding slows down,China gradually changes the single currency supply model,and the central bank adopts more open market operations and re-loans for liquidity adjustment.Due to the difference in endowment between financial institutions of different sizes,the change of base money delivery channels brings about liquidity stratification.In the context of financial innovation,the shadow central bank,which sells repo and interbank certificates of deposit as the carrier,gradually develops and expands.Large commercial banks and broad funds begin to exercise the function of central bank and transfer liquidity to small and medium-sized banks.The interaction between shadow central bank and shadow banking,on the one hand,promotes the development of the financial industry to a certain extent,but also profoundly affects the effective implementation of China’s money creation mechanism and monetary policy,posing a threat to the stability of China’s financial system.Aware of the threat posed by shadow central banking,the regulatory authorities launched a series of regulatory measures,which effectively restricted the development of shadow central banking and alleviated risks.In this process,the influence of shadow central banks on financial stability has changed under the effect of supervision.The study of shadow central bank and the in-depth understanding of its mechanism and its impact on financial stability are conducive to the construction of a sound shadow central bank theory,and hope to help defuse risks,maintain financial stability and enhance the effectiveness of supervision.This paper first sorts out the literature on shadow central bank and financial stability,analyzes the development status and role chain of shadow central bank,the definition and influencing factors of financial stability,and discusses the influence mechanism of shadow central bank on financial stability.Then,by measuring the shadow central bank and financial stability,the TVP-VAR model was used to conduct an empirical analysis on the time-varying relationship between shadow central bank and financial stability,and the differences in the influence of shadow central bank before and after regulation were compared.According to the research of this paper,shadow central banks threaten the stability of the financial system through shadow banking and monetary policies.Shadow central banks complicate the money creation system,lengthen the credit transmission chain,make supervision more difficult and reduce the efficiency of monetary policy.Secondly,the shadow central bank promotes the prosperity of shadow banking,and strengthens the idling of funds and the transfer of finance from real to virtual.Under the influence of shadow central banks,credit transmission links are increased,and participants in each link are more closely connected.The financial system is more interrelated and cross-linked,which increases the vulnerability of the financial system.However,the regulatory policies for shadow central bank and shadow banking have effectively slowed down the rapid development of shadow central bank and weakened its adverse impact on financial stability.Based on the above conclusions,this paper puts forward four suggestions: First,improve the liquidity and capital replenishment mechanism of commercial banks;Second,build and improve the macro-prudential supervision system;Third,improve the information disclosure mechanism;Fourth,continue to promote financial reform and improve the financial market.