The Research On The Macroeconomic Effect Of The Leverage Ratio

After the publication of “The General Theory of Employment, Interest, and Money” in 1936, the famous Keynesian Revolution broke out. The research of sustainable economic growth and economic fluctuation has fascinated world economists and policy makers. Especially since the reform and opening,China’s economy has made remarkable achievements and became the second largest economy in the world, but at the same time we found China’s economic growth is not stable and experienced several times of macroeconomic fluctuations. We find that high speed and sustained economic growth is not common in the world. Most of the developing countries are lack of growth. In the mid-1970 s, with a significant increase in inflation,the economy mired in a deep recession and “stag-flation” led the confidence of many economists and international policy makers for government intervention policy completely collapsed. The monetary school represented by Friedman and school of rational expectation represented by Lucas believed that the attempt to control the economic government doomed to fail. They hoped that the government’s intervention was the less. The central bank only needed to focus on low inflation target, the rest work to achieve economic growth should be left to the market. Over the past few decades central banks uphold such laws that mainly focused on the price control, unexpected that in 2008 the United States subprime mortgage crisis triggered the global financial meltdown and led the global economy into recession. Thus what is the nature and the decisive factor of the economic growth of a country? What factors lead to macroeconomic fluctuations? Is the financial market important to macroeconomic stability? What role does the financial market play in the economic growth of a country? Should the government rescue the market? The answers to these questions have important theoretical and practical significance. Under such background,this paper will discuss these questions and try to make a breakthrough in economic theory.This paper is divided into eight chapters. The first chapter is the introduction, which mainly introduces the research background and significance, research objectives, research methods and structure arrangement. The research methods mainly introduces the evolution of dynamic stochastic general equilibrium(DSGE), using dynamic stochastic general equilibrium model of quantitative analysis method, compared with the traditional econometric models.The second chapter is mainly about the domestic and foreign scholars in leverage rate macroeconomic effects in the field of literature. In order to understand the development of theory and experiences in this field and grasp the development dynamic, this chapter provides a starting point for further research on leverage rate.The third chapter analyzes high leverage levels leading to the crisis and the China’s various economic sectors’ leverage the historical evolution and current situation of the development. Focused on China’s economy into a slowdown, structural transformation and “new normal”background, this chapter studys leverage rate’ changes and provides research foundation on the theory of leverage and the macroeconomic effect.Embarked on the heterogeneous beliefs, the fourth chapter explains the various economic sectors actively increasing leverage behavior motivation. From binomial tree model of asset pricing, the paper accurately studys the relationships among the leverage, asset prices and macro-economic.In the fifth chapter, the paper constructs the dynamic stochastic general equilibrium(DSGE) of the four sectors and studys the macro-economic growth effect of leverage ratio. Based on the financial instability hypothesis, this chapter constructs a suitable for China’s national conditions DSGE benchmark model framework and uses the data of the model calibration. Then on the estimation and evaluation through the collateral constraint mechanism and credit restraint mechanism, it describes the leverage expansion and contraction of the macroeconomic effects and triggered by the impact of transmission mechanism.Based on expand the in the fifth chapter, the sixth chapter introduces the financial market friction, family credit constraints and the heterogeneity of consumer the dynamic stochastic general equilibrium model. Through the model simulation of the leverage shocks impact on the economic, it focus on the analysis of the change in leverage on the macro-economic impact effect.The seventh chapter and the eighth chapter summarizes the main conclusions of this study, and gives some suggestions on improving the control of the leverage in our country and puts forward the future research directions.