Monetary Policy, Industry Heterogeneity and Systemic Risk—Based on a High Dimensional Network Analysis

Abstract

We utilized a high dimensional financial network to investigate the systemic risk contagion between different industries in China and to explore the impacts of monetary policy and industry heterogeneity factors. The empirical results suggest that the total level of systemic risk increased quite significantly during the 2008 global crisis and the 2015–2016 Stock Market Disaster. The energy, material, industrial, and financial sectors are the top systemic risk contributors. Industry heterogeneity variables such as the leverage ratio, book-to-market ratio, return on assets (ROA) and size have significant impacts on the systemic risk, but their effects on the systemic risk contribution are more pronounced than those on the systemic risk sensitivity. Moreover, monetary policy can effectively suppress the systemic risk diffusion derived from the leverage ratio. These results are essential for investors and regulators of risk management.

Sustainable Financing in the Context of Global Crisis and Digital Transformations

“…Therefore, a set of different categories is offered, from which we distinguish between neoliberal, reformist and progressive forms of "green finance". Monetary policy, systemic risk that is based on the analysis of large-scale computer networks is analyzed by the authors (Su, Huang and Drakeford, 2019), who used the large-scale financial network to investigate risk contagion systemically across different industries in China to explore the impact of monetary policy and heterogeneous factors. The empirical results suggest that the general level of systemic risk increased a lot during the global crisis of 2008 and the stock market crash in 2015-2016.…”