China’s monetary policy surprises and systemic risk in non-financial corporations: a perspective of risk decomposition

This paper explores how China's monetary policy influences the systemic risk of non-financial corporations by decomposing systemic risk into tail risk and systemic linkage. We find that unexpected monetary policy expansion significantly decreases tail risk but enhances systemic linkage, with the combined effect leading to a reduction in systemic risk. Further analysis reveals that monetary policy-tail risk nexus is driven by a decline in corporate defaults behaviour, while the link between monetary policy and systemic linkage is associated with corporate financialization. Our findings emphasize the importance of separately analysing monetary policy's effects on tail risk and systemic linkage.