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The Penetration Mechanism And Penetration Performance Of Rural Normal Financial Institution Under Dual Economy

Posted on:2015-04-20Degree:DoctorType:Dissertation
Country:ChinaCandidate:Y L XuFull Text:PDF
GTID:1109330467950859Subject:Agricultural Economics and Management
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To address the misplaced rural financial market caused by the ignorance of market imperfection in the traditional dual economy model, and the insufficient consideration of dual economic background due to the ignorance of urban-rural segregation in the micro rural finance theories, this research built a new informal analytic framework combining both macroeconomic and microeconomic factors to analyze the mechanism and performance of the rural formal financial penetration. First, the research had an empirical study on whether the rural formal financial development had promoted the transition of dual economy. Then the research had a theoretic and empirical analysis of rural formal financial penetration mechanism and performance in the background of dual transition from the perspectives of rural production organization upgrading and the segregation of rural formal and informal financial markets. The research concluded with the information asymmetry consequence, including whether the lending contract could solve the incentive problems or relax the farmer financial constraints following the dual transition. The main contents of the dissertation are as follows:Chapter1reviewed the existing research about rural financial theory, and built a new research framework of the rural finance development. The existing research mainly focused on two questions:first, why rural financial market was segmented and why the interest rates were significantly different among different regions; second, how to design an incentive lending contract mechanism. Although these theories helped us to understand the operation of rural financial market, the dual economic characteristics of developing economies had been seriously ignored, and Lewis’ dual economy model was not considered. However, in Lewis’ dual economy model, the financing was only a layer of the veil covering the urban-rural barter exchange, and the rural financial market was seriously ignored. This flaw prevented people from understanding the operation of rural finance in a dynamic perspective of dual transformation. At the same time, in the process of dual transformation, the previously ignored information flow of rural financial market had been changing, and this could affect the design of rural lending contract incentive mechanism. Chapter2examined the economic performance of China’s rural formal financial development from a new perspective-the dual economy which was different from pervious research based on the information economics. Based on the dual economy of Fei and Ranis’s theory (1997), the research built a general equilibrium model with two sectors, which regarded the sector of financial markets as a link between urban and rural economies. Then under the theoretic framework the relationship of rural finance and dual economic transformation growth was analyzed and a hypothesis was put forward. Based on this, the hypothesis was tested using SVAR model which considered both theory and long-term relationship among variables. The empirical results showed that after controlling other factors, the hypothesis was verified to some extent. This study emphasized not only the importance of timely adjusting urban and rural financial policy, but also showed that many traditional conclusions need to be reexamined if understanding the rural financial development from a view of dual transformation economic framework.Chapter3addressed the misplaced financial factors in the traditional dual economy model which was the basis of development economy, the following two questions were asked in this chapter:How the dual economy model should be expanded in a financial view? What was the policy implication of this expansion? What did it mean in terms of the definition of rural finance functions? This chapter first put forward the view that the dual economy model could be expanded from the cash flow between the rural sector and industrial sector. Then, it put forward that the cash follow mechanism between the two sectors was decided by the effects of financial friction and policy subsidy. The effect of financial friction was caused by the financial friction difference between the two sectors, and the effect of policy subsidy was caused by government subsidy to agriculture. A financial development break point existed in the transition process, which corresponded to the Lewis break point. In the empirical chapters, two hypothesizes were tested:first, there was a deviation between Lewis break point and financial development break point; second, the deviation was decided by the strengths of two effects. This research had important policy implication:within the framework of dual economy, if the market mechanism is recognized as the key factor for the economy transition, then the function of rural financial subsidy policy will offset the cash flow distortion between two sectors, which is caused by the effect of financial friction. Chapter4first reviewed the related researches and made sample classification. Then using the method of descriptive statistics and panel data, how industrial upgrading could influence the credit ability of agriculture sector in the case of listed companies in different industries was studied. The results showed that the industrial chain upgrading could significantly improve the credit ability of the agricultural sector, although this result could not get support the assumption that agriculture was a weak industry. This could be because that agricultural enterprises were in dominant positions in the agricultural industry chain. The research showed that the extension of agricultural industrial chain improved the outside financing ability of the agricultural sector on the whole.Chapter5investigated the relationship between the interest rate marketization and rural regular financial development from a new perspective of borrower type with social capital structure effect. Different from the traditional theory, the research indicated that through the endogeny of the capturing information capability about interest rate of rural formal sector financial institutions, the economic performance of rural formal sector financial institutions were changed. The inference was tested with the DPG model. The results showed that the inference was testified in a large extent, which indicated that the interest rate marketization was important to rural formal sector financial institutions. The research showed that even in the rural financial market characterized by serious incompleteness, enough attention should be paid to price mechanism, and the market incompleteness should not be an excuse to hinder the process of interest rate marketization.Chapter6built an expanded model of rural debt contract, and put forward two hypothesizes based on the new restrictions which was the information flow variation caused by dual transformation. The chapter gave some empirical evidences to verify whether the assumptions are correct or not using the Poisson Restriction Dependent variable model. The results indicated that the optimal incentive design of rural debt contract was sensitive to the dual transformation process and the rural financial institutions. The research implied that we should open up the rural market, permitting more and more new financial institutions get access to rural financial market to optimize the rural financial structure, which might be a more efficient policy than interest rate liberalization. Chapter7intended to solve the universal dilemma of farmers’ financing difficulty which was caused by the particular characteristics of rural financial market. The chapter addressed a new perspective of formal financial contracts’ incentive designing in rural areas and analyzed its microeconomic mechanism in the process of dual transition. Firstly, based on incomplete contract theory conditional on asymmetric micro information, this chapter built a theoretic framework that the dual transformation could influence farmers’financing constraints by incentive design of debt contracts, and proposed the related hypotheses. Secondly, regarding farmers’ financing choice as a process based on rational marginal decisions between different financing approaches, this chapter used sample data to test the hypotheses within the theoretic framework above, and came to conclusions that the optimization of incentive designing of debt contracts was caused by dual transition process which increased formal financial loans, and the introduction of new types of rural financial institutions induced no significant changes in farmers’ financing constraints.
Keywords/Search Tags:dual transformation, rural formal financial market, market imperfection, penetration mechanism and penetration performance
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