Econometric Research On The Effect Of Financialization On China's Macro-economy

Looking at the process of the evolution of the world economy,financialization is a process accompanied by the development of market economy and the deepening of finance.The phenomenon of financialization will continue as a long-term trend.The trend and cyclical fluctuations of China's financialization are not only inseparable from the international economic and financial environment as well as the development of China's financial markets,but also closely linked with the orientation and the intensity of China's macro-control policies.Therefore,we have reason to believe that there is an important linkage between China's financial economy and macro-economy.A deep understanding of the nature of financialization and a discussion of the dynamic mechanism of financialization on macro-economic growth and fluctuations in China are of great importance for economic transition and financial reform for our country.Base on this,this paper firstly sorts out the basic theory of financialization and defines the meaning of financialization.Then,based on the analysis of the typical facts of China's financialization and the references to the relevant researches about the measurements of financialization at home and abroad,we construct China's financialization index.Finally,based on the synthetic financialization index,we use some macro-econometrical models to study the dynamic impact of China's financialization on the macro-economy.The conclusions are drawn as following:Firstly,although there are some differences in the definition of financialization,the consensus we can reach is that:the financial sector or financial capital has different nature and operating rules compared with the industrial sector or industrial capital.In terms of quantity,financialization means that the financial sector or financial capital can make more profits;In terms of quality,financialization means the position of the financial sector or financial capital is dominant.Secondly,based on the analysis of the typical facts of China's financialization,and references to the relevant researches about the measurements of financialization at home and abroad,we select seven representative basic indicators and then use the principal component analysis to synthesize China's financialization index.Overall,the financialization of the economy shows a steady upward trend,but also shows some volatility.Thirdly,we use neoclassical economic growth model to construct the endogenous mechanism of the optimal financial formation and economic growth,and then analyze the dynamic characteristics,deviation from the steady state and recovery mechanism of the optimal financialization,providing a theoretical basis for the influencing mechanism of financialization on economic growth.Further,the empirical analysis are carried out respectively by using the Markov regime-switching model and the threshold regression model.The results show that:(1)the impact of financialization on economic growth has obvious characteristics of "regime switching".When the economic growth is in a state of high volatility,the positive relationship between financialization and economic growth is not significant.When the economic growth is in a state of relatively low volatility,there is a significant negative correlation between financialization and economic growth;(2)there is a clear "double-threshold" effect on economic growth.Too low or too high level of financialization will inhibit economic growth.The sustained and steady economic growth will be maximized only when financialization is within a reasonable range.Both of the two non-linear models can well explain the phenomenon of "shift from real economy to virtual economy" in our country in recent years.Fourthly,a TVP-VAR model is established with three variables of financialization,output gap and inflation.Two kinds of impulse response functions are used to analyze the time-varying characteristics of financial impact on economic fluctuation and inflation.The research shows that:although the "output effect" of financialization shocks is no obvious than "price effect",the financialization shock has a significant time-varying effect on the output gap and inflation,and the mechanism has changed structurally overtime.The development of the financialization will quickly lead to the expansion of output gap and the increase of inflation in the short term,economic fluctuations and inflation pressure are more obvious.In the long-term,with the growing development of the financial system and the continuous improvement of financial regulatory,economic fluctuations and inflation pressure caused by the financialization shock will be significantly weakened,and eventually leading to the narrowing of output gap and the decrease of inflation,which indicates an inhibitory effect on economic fluctuations and inflation Moreover,the effects of financialization on economic fluctuations and inflation have a strong persistence.