Abstract:
By constructing the interbank liquidity creation index and the non-interbank liquidity creation index respectively, we examine the impact of monetary policies on the reaction of bank liquidity in terms of growth rates and the structure as well, we explore the factors that influence commercial banks to carry out interbank business. We find that loose monetary policies would increase the growth of total liquidity creation but reduce the growth of interbank liquidity creation and enlarge the non-interbank liquidity creation. Moreover, we find monetary policies have heterogenous effects on banks. Loose monetary policies would reduce the growth of interbank liquidity creation for banks deeply involving into interbank business. Monetary policies also significantly alter the composition of banks' interbank assets. The banks involving more into interbank business tend to having higher risks. Finally, under the macro-prudential policy framework, we suggest improving the coordination of monetary policy and financial supervision, using multiple monetary policy tools for anticipatory adjustments and fine-tuning in time, further promoting the development of financial market and reducing the over reliance of banks on the interbank business.
Berger, A.N. and C.H.S. Bouwman. 2009. “Bank Liquidity Creation”, Review of Financial Studies, 22(9): 3779~3837.
[18]
Berger, A.N. and C.H.S. Bouwman. 2012. “Bank Liquidity Creation, Monetary Policy, and Financial Crises”, Working Paper.
[19]
Bernanke, B.S. and A.S. Blinder. 1992. “The Federal Funds Rate and the Channels of Monetary Transmission”, The American Economic Review, 82(4): 901~921.
[20]
Bernanke, B.S. and M. Gertler. 1995. “Inside the Black Box: The Credit Channel of Monetary Policy Transmission”, The Journal of Economic Perspectives, 9(4): 27~48.
[21]
Bhattacharya, S. and A.V. Thakor. 1993. “Contemporary Banking Theory”, Journal of Financial Intermediation, 3(1): 2~50.
[22]
Borio, C. and H. Zhu. 2012. “Capital Regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism？”, Journal of Financial Stability, 8(4): 236~251.
[23]
Cúrdia, V. and M. Woodford. 2010. “Credit Spreads and Monetary Policy”, Journal of Money, Credit and Banking, 42(S1): 3~35.
[24]
Diamond, D.W. and P.H. Dybvig. 1983. “Bank Runs, Deposit Insurance, and Liquidity”, The Journal of Political Economy, 91(3): 401~419.
[25]
Diamond, D.W. and R.G. Rajan. 2001. “Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking”, Journal of Political Economy, 109(2): 287~327.
[26]
Haan, W.J.D. and V. Sterk. 2011. “The Myth of Financial Innovation and the Great Moderation”, The Economic Journal, 121(553): 707~739.
[27]
Kashyap, A.K. and J.C. Stein. 1995. “The Impact of Monetary Policy On Bank Balance Sheets”, Carnegie-Rochester Conference Series On Public Policy, 42: 151~195.
[28]
Kashyap, A.K., R. Rajan and J.C. Stein. 2002. “Banks as Liquidity Providers: An Explanation for the Coexistence of Lending and Deposit-Taking”, The Journal of Finance, 57(1): 33~73.
[29]
Kishan, R.P. and T.P. Opiela. 2012. “Monetary Policy, Bank Lending, and the Risk-Pricing Channel”, Journal of Money, Credit and Banking, 44(4): 573~602.
[30]
Maddaloni, A. and J.L. Peydro. 2011. “Bank Risk-Taking, Securitization, Supervision, and Low Interest Rates: Evidence From the Euro-area and the US Lending Standards”, The Review of Financial Studies, 24(6): 2121~2165.
[31]
Nelson, B., G. Pinter and K. Theodoridis. 2018. “Do Contractionary Monetary Policy Shocks Expand Shadow Banking？”, Journal of Applied Econometrics, 33(2): 198~211.
[32]
Rauch, C., S. Steffen, A. Hackethal and M. Tyrell. 2009. “Savings Banks, Liquidity Creation and Monetary Policy”, Working Paper.
[33]
Thakor, A.V.. 2005. “Do Loan Commitments Cause Overlending？”, Journal of Money, Credit, and Banking, 37(6): 1067~1099.
