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China’s Monetary Policy and Systemic Risk

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  • Jianhua Gang
  • Zongxin Qian

Abstract

We study the effect of domestic monetary policies on China’s systemic risk after the collapse of Lehman Brothers. Evidence shows China’s systemic risk was relatively high in 2009 and to the end of 2011. The increased systemic risk was partly due to the contagion from the volatile global financial market, but effects from domestic monetary policy actions are also nonnegligible. Evidence also suggests monetary policy shocks significantly increased China’s systemic risk between October 2008 and November 2013 while they had a limited effect on the real economy. Findings in this article call for a more prudent monetary policy in the context of high global financial risk.

Suggested Citation

  • Jianhua Gang & Zongxin Qian, 2015. "China’s Monetary Policy and Systemic Risk," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(4), pages 701-713, July.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:4:p:701-713
    DOI: 10.1080/1540496X.2015.1039895
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    Cited by:

    1. Yufei Cao, 2021. "Modeling the dependence structure and systemic risk of all listed insurance companies in the Chinese insurance market," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 24(4), pages 367-399, December.
    2. Wang, Gang-Jin & Xie, Chi & Zhao, Longfeng & Jiang, Zhi-Qiang, 2018. "Volatility connectedness in the Chinese banking system: Do state-owned commercial banks contribute more?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 57(C), pages 205-230.
    3. Wang, Gang-Jin & Jiang, Zhi-Qiang & Lin, Min & Xie, Chi & Stanley, H. Eugene, 2018. "Interconnectedness and systemic risk of China's financial institutions," Emerging Markets Review, Elsevier, vol. 35(C), pages 1-18.
    4. Wu, Fei & Zhang, Dayong & Zhang, Zhiwei, 2019. "Connectedness and risk spillovers in China’s stock market: A sectoral analysis," Economic Systems, Elsevier, vol. 43(3).
    5. Yang-Chao Wang & Jui-Jung Tsai & Qiaoqiao Li, 2017. "Policy Impact on the Chinese Stock Market: From the 1994 Bailout Policies to the 2015 Shanghai-Hong Kong Stock Connect," IJFS, MDPI, vol. 5(1), pages 1-19, January.
    6. Nguyen, Hoai Thi Thanh & Tram, Huong Thi Xuan & Nguyen, Linh Thi Thuy, 2023. "Interest rates and systemic risk:Evidence from the Vietnamese economy," The Journal of Economic Asymmetries, Elsevier, vol. 27(C).
    7. Xu, Qifa & Chen, Lu & Jiang, Cuixia & Yuan, Jing, 2018. "Measuring systemic risk of the banking industry in China: A DCC-MIDAS-t approach," Pacific-Basin Finance Journal, Elsevier, vol. 51(C), pages 13-31.

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