Abstract
Since the international financial crisis in 2008, to achieve the political goal of financial stability, academic circles, financial industry, and regulatory authorities worldwide have deeply reflected on the current economic regulatory theories and policy adjustment tools through introducing the macroprudential policy. The dynamic provisioning system is a counter-cyclical policy tool in the macro-prudential adjustment framework widely used in the world. This paper uses the binary Gaussian Copula function to combine the measurement method of the default distance in the contingent claims analysis method with the risk warning idea based on the Probit model and proposes the contingent claims analysis (CCA)–Probit–Copula dynamic provisioning model based on nine forward-looking indicators. Based on China’s actual conditions, this model solves present problems faced by the current dynamic provisioning system in China, such as insufficient historical credit data reserves of commercial banks, excessive reliance on subjective judgments, and conflicts with the current accounting system. Moreover, this model can put forward corresponding counter-cyclical provisioning requirements according to the influence degree of macro-cyclical factors to different commercial banks’ own default risk, which not only takes into account the security and liquidity of commercial banks, but also ensures their profitability and competitiveness. Based on the empirical test of historical data from listed commercial banks in China, it proves that the dynamic provisioning requirements proposed in this model can effectively adjust the overall credit scale of the banking industry in counter-cyclical ways, thereby achieving the policy goals of counter-cyclical adjustment under the macro-prudential framework and maintaining the security of China’s financial system and the sustainable development of the macroeconomy.
Highlights
For a long time, maintaining the steady growth and sustainable development of the national economy has been the fundamental purpose of macroeconomic policy adjustment and the common pursuit of macroeconomic theory
Through the regression analysis of Event 1 and Event 2, it can be found that the larger the output gap in the current period, the more generally inhibiting the effect on the default risk of the commercial banking industry
In China, under an economic system dominated by indirect financing, maintaining the continuity of commercial bank credit is the key to ensuring the sustained development of the national economy
Summary
For a long time, maintaining the steady growth and sustainable development of the national economy has been the fundamental purpose of macroeconomic policy adjustment and the common pursuit of macroeconomic theory. Since the 1990s, the financial systems of major countries in the world have shown a trend of rapid development and deepening. Financial security and stability have become new key factors that determine the economy’s health and sustainable development. Traditional economic adjustment tools have policy objectives that are mainly price stability, economic growth, full employment, and balance of international payments. According to Tinbergen’s rule and policy comparative advantage theory, major countries generally choose to introduce macro-prudential policies as a supplement to traditional economic adjustment policy tools, which has the effect of promoting sustainable and stable economic development
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
