Journal
PACIFIC-BASIN FINANCE JOURNAL
Volume 75, Issue -, Pages -Publisher
ELSEVIER
DOI: 10.1016/j.pacfin.2022.101855
Keywords
COVID-19; Chinese monetary policy; Crises; Financial stability; TVP-VAR model
Categories
Funding
- Major Program of the National Social Science Foundation of China [20ZD147]
- National Natural Science Foundation of China [71703123]
- Major Program of Educational Commission Foundation of Jinlin Province [JJKH20220933SK]
- Social Science Foundation of Jilin Province [2021B59]
- The New Liberal Arts Innovation Team Project of Jilin University [2021XWK03]
- Social Science Foundation of Shaanxi Province [2022D040]
- Judd Leighton School of Business & Economics of Indiana University South Bend
Ask authors/readers for more resources
This research investigates the role of China's monetary policy in maintaining financial stability after crises in the 21st century. The study finds that the scale of social financing, stock market performance, and financial deepening in China have significant influences on financial stability. Both quantitative and price-based monetary policies, especially in the short term, can promote financial stability, with quantitative policy being more effective and becoming the main policy tool in China.
This research investigates the role that China's monetary policy has played in maintaining financial stability after crises in the 21st century. We construct a financial stability index (FSI) with eight variables from four characteristics that reflect variations in the financial stability of China, and analyze the dynamic impacts of China's monetary policies on financial stability with a time-varying parameter vector-autoregressive (TVP-VAR) model. The three major crises that China has been involved in the past 15 years (i.e., the 2008 global financial crisis, 2015 stock market crash in China, and the ongoing COVID-19 crisis) indicate that the scale of social financing, stock market performance, and the degree of financial deepening in China have great influences on financial stability. We observe supportive evidence, moreover, that both quantitative and price-based monetary policies can promote financial stability after crises in China, especially in the short term. The quantitative policy is more effective than price-based monetary policy and has become the main policy tool in China. At a time when the world economy is still suffering from the COVID-19 crisis, the quick economic recovery is an imperative task for all countries. It is of great theoretical and practical significance to understand the relationship between monetary policy and financial stability after crises.
Authors
I am an author on this paper
Click your name to claim this paper and add it to your profile.
Reviews
Recommended
No Data Available