The Global Financial Crisis (GFC) will cause turbulence in the pharmaceutical market and the stagnation of market liquidity, leading to a deep recession in the pharmaceutical economy. After the COVID-19 outbreak, the pharmaceutical economic recession and the rising pharmaceutical financial crisis caused by the closure and control of the COVID-19 outbreak in China were important reasons for the accumulation of systemic financial risks in China. To realize the pharmaceutical economy and financial stability, this paper studies the weakening mechanism of the stabilization effect in systemic risk scenarios and analyzes how the evolution of systemic risk under the COVID-19 shock affects the stabilization effect of monetary policy. Under the COVID-19 shock, in the stage of falling China Financial Stress Index (CFSI), the systemic risk is relatively low, and the impact of traditional policy on macroeconomic stability is more significant; in the rising stage of CFSI, the systemic risk is relatively high, and the impact of traditional policy on macroeconomic stability is limited. This paper develops a Time-Varying Modified CRITIC weighting method and constructs a Time-Varying CFSI. This paper identifies systemic risk scenarios under the COVID-19 shock based on the Markov-Switching Mean Heteroskedastic Vector Auto-Regressive (MSMH-VAR) model and evaluates the stabilizing effects of monetary policy in different economic and financial regional systems (normal times and systemic risk scenarios). The results show that in normal times, loose monetary policy increases price levels, and tight monetary policy reduces price levels with a time lag. In systemic risk scenarios under the COVID-19 shock, the easing effect of policy on output growth is relatively small, and tighter policy increases output growth and prices in the short run and increases volatility in output growth and price levels in the long run. That is, under the COVID-19 shock in systemic risk scenarios, it is difficult to achieve stable growth and stable prices with monetary policy, and the stabilization effect is weakened. This paper focuses on the relationship between systemic risks, monetary policy, and output stability under the COVID-19 shock, analyzes the weakening of stabilization effects after the crisis, and expands the theoretical path of monetary policy stabilization and enriches the research scope of the new framework.
