The Research On China's Financial Accelerator Transmission Mechanism

Financial market can effect the fluctuation of economy has been confirmed by the experience. The global economic crisis occurred in recent decades is closely related with the financial markets. And the internal mechanism of this phenomenon can not be well explained by real business cycle model and a number of traditional economic theories. However, fully understanding of the transmission mechanism of financial accelerator can help us understand how the financial markets amplify the economic fluctuations, and it also can help the government implement effective policies to make economy stable when unexpected negative impact happens. Many scholars suggest that the transmission channel of financial accelerator is asymmetric. The financial accelerator is more efficient and effective in amplifying the negative monetary shocks. And this paper analyzes the transmission mechanism of financial accelerator through the amplification effect of a monetary shock.Firstly, this paper introduces the development of the financial accelerator context, introduces the basic theoretical framework of the financial accelerator, summarizes the research methods and research results of scholars. Scholars have generally agreed that several key factors the financial accelerator is the financial friction, external financing and credit markets.Then this paper analyzes the role of monetary market in the economy fluctuations through a dynamic equilibrium model which is based on the behavior of families, entrepreneurs, retailers and government. Through this model, the financial accelerator mechanism is introduced to the new Keynesian dynamic framework to display how the financial accelerator works. The monetary market can amplify the shock on macro-economy, and lead to an enormous impact on the economy. Through a simple partial equilibrium model this paper analyzes how the monetary supply can trigger financial accelerator. The model clearly describes the monetary shock on aggregate demand and the final production in the presence of credit constraints.After that, this paper select the quarterly data of variables comprising GDP, CPI, total loans of financial institutions, industrial enterprises'total assets, total retail sales of social consumer goods.6-month deposit and loan spreads, fixed assets investment, foreign exchange reserves, MO, Ml, M2 and the stock market value to verify the existence of financial accelerator transmission channels in our country. Then this paper use the VEC model and impulse response function to test the monetary shock on economic variables through financial accelerator channel. And this paper also analyzes the interdependence of return on investment, external financing costs and net worth. Then the TARCH model is used to test whether the financial accelerator amplifies positive and negative shocks asymmetrically, including the asymmetric effect on return on investment, external financing costs and net worth.Finally, based on the results of empirical analysis, this paper analyzes the reason of the financial accelerator conduction characteristics. Then this paper puts forward some suggestions in the stand of view of enterprises, banks and government respectively.