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China’s Banking Industry’s Financial Pressure and its Transmission Mechanism Research

Author: ZhouYan
Tutor: OuYangZhiGang
School: East China Jiaotong University
Course: Industrial Economics
Keywords: Financial stress Transmission effect Geweke decomposition test
CLC: F832.3
Type: Master's thesis
Year: 2013
Downloads: 3
Quote: 0
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Abstract

With China’s accession to the WTO, the process of economic reform continues to deepen,the pace of financial reform continues to accelerate, the whole financial system is in adramatically changing period, and various losses, risks and uncertainties in the financialmarkets have increased. In our country, there is no real financial crisis, but the potential crisisexists, this potential crisis is China’s financial markets’ facing financial pressure, so analyzeissues on China’s financial markets’ financial pressure has important practical meaning. Sincebanking is in a core position in China’s economic and financial system, this thesis focuses onChina’s banking financial pressure, and further explored its transmission mechanism andeffect in financial markets and macroeconomic. This is a meaningful research topic. Itprovides a new theoretical basis to guard against financial risk.This thesis based on the related research at home and abroad. First of all, choose areasonable indicator data on China’s actual situation, and construct China’s four majorfinancial markets’ financial pressure index, and analyze China’s financial market situation, theresults are: China’s banking financial pressure has a upward trend, the trend of bond and stockmarket’s financial pressure line are similar to the banking, the fluctuations of the foreignexchange market financial pressure line is not similar to the other three. Second, use Gewekedecomposition test methods to analyze banking financial stress’s conduction mechanism infinancial markets. The main conclusions are: there exists significant two-way causalitybetween banking and bond markets’ financial pressure, the immediate causality feedbackshare accounts for79.14%, which means banking financial pressure can be transmitted tobond market in short term; there also exists significant two-way causality between bankingand stock markets’ financial pressure, the long-term feedback share accounts for99.46%,which means the transmission between them exists in long term; the two-way causalitybetween banking and foreign exchange markets’ financial pressure is not significant, whichmeans the transmission between them is not obvious. Third, adopt VAR model, use Grangercausality test method and pulse response function to analyze transmission mechanism ofbanking financial pressure to macroeconomic. The conclusions are: the strengthening ofbanking financial pressure has a greater impact on the growth rate of GDP and M2; thefluctuation of GDP growth rate and CPI has a greater impact on banking financial pressure.Finally, propose measures to ease China’s banking financial pressures. We should not onlyguard against the banking financial risk, but also guard against the pressure of bond market inthe short term, the pressure of stock market in the long term. When central bank takesappropriate measures to prevent risks, it can coordinate with macroeconomic policies, in order to alleviate the banking financial pressure effectively, and maintain financial market’ssustainable, healthy and stable development.

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CLC: > Economic > Fiscal, monetary > Finance, banking > China's financial,banking > Financial organizations, banks
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