A STUDY ON THE NONLINEAR SPIRAL BETWEEN BANK FUNDING LIQUIDITY AND STOCK MARKET LIQUIDITY

It is not uncommon for bank funding liquidity and stock market liquidity to interact with each other, which shows spiraling changes and eventually leads to a full-blown liquidity crisis. The study of the spiral relationship between them is an important part of maintaining financial security. This paper breaks away from the linear analysis, employs detrended cross-correlation analysis (DCCA) to explore the nonlinear spiral structure between bank funding liquidity and stock market liquidity, and uses transfer entropy (TE) to analyze the causality of the nonlinear spiral structure between them. The results show that there is a nonlinear spiral between bank funding liquidity and stock market liquidity, and the bank funding liquidity dominates the changes of the liquidity spiral. The findings reveal new features of the spiral structure between bank funding liquidity and stock market liquidity, provide a new perspective for the in-depth study of the liquidity spiral, and set up a new path for managing liquidity risk.