Analysis of Systemic Risk Scenarios and Stabilization Effect of Monetary Policy under the COVID-19 Shock and Pharmaceutical Economic Recession
Abstract
:1. Introduction
2. Theoretical Basis of Stabilizing Effect of Monetary Policy
2.1. Stabilization Goals
2.2. Stabilization Tools
2.2.1. Policy Rate
2.2.2. Open Market Operations
2.2.3. Standing Facilities
2.2.4. Statutory Deposit Reserve Ratio (SDRR)
2.3. Stabilization Channels
2.3.1. Neoclassical Conduction Channels
- (1)
- Interest Rate Channel (IRC)
- (2)
- Asset Price Channel (APC)
- (3)
- Exchange Rate Channel (ERC)
2.3.2. Non-Neoclassical Transmission Channels
- (1)
- Bank Lending Channel (BLC)
- (2)
- Broad Credit Channel (BCC)
3. Weakening Analysis of Stabilization Effect Based on IS–MP Model
3.1. Model Construction
3.2. Model Analysis
3.2.1. Impact of Financial Intermediary Credit Supply on Output in Systemic Risk Scenarios
3.2.2. Weakening of the Stabilization Effect of Traditional Monetary Policy in Systemic Risk Scenarios
4. Quantitative Analysis of China’s Systemic Risks Based on the Financial Stress Index (FSI)
4.1. Indicator Selection
4.2. Financial Stress
4.2.1. Currency Market Financial Stress
4.2.2. Bond Market Financial Stress
4.2.3. Stock Market Financial Stress
4.2.4. Forex Market Financial Stress
4.2.5. Real Estate Market Financial Stress
4.3. Synthesis of CFSI Based on the Time-Varying Modified CRITIC Weighting Method
5. Characteristic Fact Investigation of the Stabilizing Effect of China’s Monetary Policy
6. Empirical Analysis of the Stabilization Effect of China’s Monetary Policy in the Systemic Risk Scenarios
6.1. Model Construction
6.2. Variable Selection
6.3. Model Estimation
6.3.1. Variable Stationarity Test
6.3.2. Form Determination of MS-VAR Model
6.3.3. Estimated Results
6.4. Analysis of Measurement Results
7. Discussion
8. Conclusions
Author Contributions
Funding
Institutional Review Board Statement
Informed Consent Statement
Data Availability Statement
Conflicts of Interest
References
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Variable Name | Calculation Method | Influence Direction | |
---|---|---|---|
Currency market | SHIBOR term spread (M1) | The difference between 1-year period and 7-day SHIBOR | Negative |
Spread between interbank offered rate and Treasury bond yield (M2) | The spread between the 3-month interbank offered rate and the 3-month Treasury bond maturity yield | Positive | |
Bond market | Treasury bond maturity spread (B1) | The term spread between the 10-year Treasury bond and the 3-month Treasury bond yield to maturity | Negative |
Spread between corporate bonds and government bonds (B2) | The difference between the yield to maturity of the 1-year AAA corporate bonds and the 1-year Treasury bonds | Positive | |
Stock market | Stock price volatility (S1) | IGARCH volatility of the Shanghai Composite | Positive |
Forex market | Real effective exchange rate volatility (F1) | IGARCH volatility of the real effective exchange rate | Positive |
Exchange rate fluctuations (F2) | IGARCH volatility of RMB to USD | Positive | |
Real estate market | House price volatility (H1) | IGARCH volatility of commodity housing sales prices | Positive |
House price overvaluation level (H3) | Regression residuals of per capita disposable income and interest rates on real estate prices | Positive |
Variable Selection | Variable Description | Data Sources | |
---|---|---|---|
Monetary policy variables | Real money supply (rM2_gro) | Year-on-year growth rate of M2 excluding price factors | CEIC |
Real short-term rate (rR007) | R007 excluding price factors | CEIC | |
Real economic variables | Actual output (rGDP_gro) | Year-on-year growth rate of real GDP | CEIC |
Inflation (CPI) | CPI year-on-year growth rate | CEIC | |
Systemic risk level | China Financial Stress Index (CFSI) |
Variable Name | T Statistic | p-Value |
---|---|---|
rGDP_gro | −4.900567 *** | 0.0012 |
CPI | −4.250878 *** | 0.0014 |
CFSI | −3.183057 ** | 0.0271 |
rR007 | −3.327355 ** | 0.0211 |
rM2_gro | −4.655218 *** | 0.0027 |
Variable Mean | Variable Intercept | ||
---|---|---|---|
Aj Constant | Constant Variance | Markov-Switching Mean Vector Auto-Regressive Model (MSM-VAR) | Markov-Switching Intercept Vector Auto-Regressive Model (MSI-VAR) |
Variable Variance | Markov-Switching Mean Heteroskedastic Vector Auto-Regressive Model (MSMH-VAR) | Markov-Switching Intercept Heteroskedastic Vector Auto-Regressive Model (MSIH-VAR) | |
Aj Variable | Constant Variance | Markov-Switching Mean Autoregressive Coefficient Vector Auto-Regressive Model (MSMA-VAR) | Markov-Switching Intercept Autoregressive Coefficient Vector Auto-Regressive Model (MSIA-VAR) |
Variable Variance | Markov-Switching Mean Autoregressive Coefficient Heteroskedastic Vector Auto-Regressive Model (MSMAH-VAR) | Markov-Switching Intercept Autoregressive Coefficient Heteroskedastic Vector Auto-Regressive Model (MSIAH-VAR) |
Model Form | Log Likelihood | AIC | HQ | SC |
---|---|---|---|---|
MSM(2)-VAR(1) | −85.499 | 5.6122 | 6.3739 | 7.6198 |
MSMA(2)-VAR(1) | −351.0524 | 17.4715 | 18.5994 | 20.4444 |
MSMH(2)-VAR(1) | −65.7095 * | 5.4167 * | 6.3981 * | 8.0035 * |
MSMAH(2)-VAR(1) | −351.0524 | 18.0838 | 19.4314 | 21.6358 |
MSI(2)-VAR(1) | −86.8419 | 5.667 | 6.4287 | 7.6747 |
MSIA(2)-VAR(1) | −145.574 | 10.0234 | 11.4882 | 13.8843 |
MSIH(2)-VAR(1) | −69.9882 | 5.5914 | 6.5728 | 8.1781 |
Conversion Probability | Zone 1 | Zone 2 |
---|---|---|
Zone 1 | 0.9565 | 0.0435 |
Zone 2 | 0.0769 | 0.9231 |
Sample | Frequency | Duration | |
---|---|---|---|
Zone 1 | 24.0 | 0.6389 | 23.00 |
Zone 2 | 25.0 | 0.3611 | 13.00 |
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Dong, H.; Zheng, Y.; Li, N. Analysis of Systemic Risk Scenarios and Stabilization Effect of Monetary Policy under the COVID-19 Shock and Pharmaceutical Economic Recession. Sustainability 2023, 15, 880. https://doi.org/10.3390/su15010880
Dong H, Zheng Y, Li N. Analysis of Systemic Risk Scenarios and Stabilization Effect of Monetary Policy under the COVID-19 Shock and Pharmaceutical Economic Recession. Sustainability. 2023; 15(1):880. https://doi.org/10.3390/su15010880
Chicago/Turabian StyleDong, Hao, Yingrong Zheng, and Na Li. 2023. "Analysis of Systemic Risk Scenarios and Stabilization Effect of Monetary Policy under the COVID-19 Shock and Pharmaceutical Economic Recession" Sustainability 15, no. 1: 880. https://doi.org/10.3390/su15010880