Abstract: Monitoring systemic financial risk and identifying the impact of this risk on the operational effects of monetary policy have significant practical value in balancing growth stabilization and risk prevention. The study innovatively applies the DMA-TVP-FAVAR model to build China's systemic financial risk index from a dynamic perspective and evaluates the nonlinear impact of financial risk on the output and price effects of price-based monetary policy with the help of the MS-VAR model. The study finds that:the money market has an important position in China's financial system, and the prevention of financial risks cannot be separated from the smooth operation of the money market, and the banking industry, stock market, real estate industry, and foreign exchange market account for a limited proportion of China's systemic financial risk index, but their relative importance has risen. China's systemic financial risk is characterized by a clear two-zone system and maintains a higher persistence of high-risk zones. Under the role of systemic financial risk, the operational effect of price-based tools shows asymmetry and the existence of financial risk substantially weakens the effectiveness of monetary policy, so it is necessary for the central bank to increase the intensity of monetary policy operations in order to realize the macroeconomic control objectives. The research helps to establish a systemic financial risk response mechanism with Chinese characteristics.

Key words: systemic financial risk, monetary policy, asymmetric, DMA-TVP-FAVAR, MS-VAR