Professor Wenfeng Wu from the Finance Department of our institution (corresponding author), Master Shichuan Lin, and lead author Yue Hu from East China University of Science and Technology have published a paper in the "Journal of Management Sciences." The paper is titled "Liquidity Stratification in the Money Market: Measurement, Causes, and Impact" (Issue 8, 2022).

【Paper Abstract】

Foreign literature has documented a significant impact of money market and institutional financing on financial stability; but the big differences in market structure and low availability of data hinder domestic scholars’ research on this issue. Using five indicators from collateralized repo market and interbank certificates of deposit market，this paper constructs an index of money market liquidity stratification in terms of factor analysis. Time series analysis shows that the money market liquidity stratification increases sharply and exhibits a weaker correlation with the default risk of financial institutions after the Baoshang Bank was taken over, which reflects a deterioration of price efficiency in money market． On top of that，money market liquidity stratification will also lead to an increase in the financial cost of low credit rating and private firms，default probability of financial institutions and financial instability. Overall, this paper measures the liquidity stratification of money market，examines the causes behind its sudden surge and explores its impact on corporate financing and financial stability, which has implications for how finance can support economy better.

【About the Authors】

WU Wenfeng: A professor at the Finance Department of the Antai College of Economics and Management, Shanghai Jiao Tong University, currently serving as the Dean of the Humanities Department and the Director of the Think Tank Center at Shanghai Jiao Tong University. He was selected as one of the first batch of Ministry of Education Yangtze Young Scholars in 2016 and received the first batch of National Outstanding Youth Science Fund in 2012. His main research interests are in financial engineering, securities markets, and corporate finance. Since 2008, he has published or had accepted for publication over 20 SSCI English papers in internationally renowned journals, including the "Journal of Law & Economics," "Review of Finance," "Journal of Banking & Finance," "Journal of Corporate Finance," etc., and dozens of Chinese papers in "Chinese Social Sciences," "Economic Research," "Management World," "Economic Quarterly," and others. He has won several Outstanding Achievement Awards in Humanities and Social Sciences Research in Chinese Universities and Shanghai Philosophy and Social Science Outstanding Research Achievement Awards.

HU Yue: A lecturer in the Finance Department of the Business School at East China University of Science and Technology School of Business. He completed her doctorate in 2020 at the Antai College of Economics and Management, Shanghai Jiao Tong University, under the guidance of Professor Wenfeng Wu.