The Research On China's Financial Risk Indicators System And Early Warning System

The repeated occurrence of financial crises and major economic events since the 1990s pointed to the basic fact: There is no financial security without the economic security and there is also no national security without the economic security. Therefore, the prevention of financial crises is in the dominant position in all countries.The impact of the proliferation of subprime mortgage crisis on the real economy continued to deepen since 2008 and the world economy growth slowed down significantly. The subprime mortgage crisis has evolved into a global financial crisis, which brought about the increased volatility of global financial markets and further spread to the real economy. Along with economic globalization, China's economy ties with the world economy more closely. Sharing the enormous financial interests of economic globalization and financial deepening, our country is also in the face of the greater financial risks from home and abroad at the meantime and China's financial markets will inevitably suffer from the influence and shock of the international financial markets. Therefore, the study of the impact of the subprime mortgage crisis on China's economy and the study of generation mechanism of financial crisis and exploration of the reasons for the deterioration of financial risks and the establishment of a flexible and effective early warning system of financial crises lend some support to the prepare to dealing with the financial crisis in advance and enhance the anti-risk ability to withstand the international financial crisis and promote economic development and safeguard social stability. This study is of important theoretical and practical significance.This article constructs the early warning system from the currency crisis, banking crisis and asset bubble crisis respectively, exploring the microstructure of our financial risks. On the basis of the above sub-markets, the article also analyze comprehensively the overall risk profile of China's financial market and provide the early warning of financial risks. Specifically, the financial risk early warning system mainly consists of the excavation of the alert source, monitoring index system of financial crisis, early warning models of sub-markets and overall risk model of the financial system. The specific contents are listed as follows:Chapterâ… is the introduction,which introduces the background and significance of the research topics,defines some basic concepts, list the overall research concepts and point out the research methods and innovations.Chapterâ…¡provides the financial crisis theory and research summary. The paper explores the development track and main research results of the four-generation financial crisis theory as well as reviewing financial crises transmission theory and traditional and innovative early warning models of financial crisis. The article outlines the inadequacies of the previous studies at home and abroad and draws a conclusion that the focus of improving the early warning system must been put on the thought, the selection of indicators and a comprehensive selection of financial risk models.Chapterâ…¢investigates the contagion of U.S. subprime mortgage crisis to China. This chapter initially studies the root reason of the U.S. subprime mortgage crisis, and then based on the VAR model series, applies the empirical test to the infection possibility of the United States subprime mortgage crisis to China's economy from the angle of trade channels and transmission channels. Finally this paper will sum up the enlightenment that U.S. subprime mortgage crisis brought to China and this paper.Chapterâ…£focuses on the early-warning indicator system and the building of pressure index. This chapter improves the previous synthetic methods of pressure index, namely, constructs the currency crisis pressure index, banking crisis pressure index and asset bubble crisis pressure index to describe the financial risk. This article builds a broad system of early warning and monitoring indicators system and combines with Granger causality test method to select the sensitive index. Based on the MS-VAR model, Chapterâ…¤introduces the China's financial crisis early warning model. This chapter takes advantage of the MS-VAR model to build the early warning model of China's financial risk. At first, the article discusses the merits of MS-VAR model, in contrast to the traditional early-warning modes, and then constructs early warning models of the currency crisis, banking crisis and asset bubbles crisis respectively to describe the of financial risks situations of sub-markets. Finally, this chapter gives the future risk situation of Chinese financial markets.Chapterâ…¥deals with China's financial vulnerability index and overall risk early warning. On the ground of the selected indicators that involved in the currency crisis, banking crisis and the asset bubble crisis and the factor analysis, this chapter synthesizes the financial vulnerability index. Then the application of SWARCH Model leads to the construction of early warning models, which can describe the overall risk situation and predict the future risks.The conclusions of this article are as follows: Through the study of four generations of the financial crisis, this paper finds that causes of financial crisis are complex. The deterioration of macroeconomic factors, the collapse of the banking system and the attack of monetary system will lead to the financial crisis. Therefore, exploring the potential factors of causing the financial crises, analyzing the inherent vulnerability in Chinese financial system and constructing a multi-level and integrated financial crisis early warning system are of practical significance.On the basis of the comparative study of traditional financial crisis early-warning models, this paper finds that the early warning indicator of exist financial risks models are limited. The subjective selection of threshold causes the man-made crisis. And the Markov District model system can overcome the traditional problems.This paper gives a in-depth study of the causes of American subprime mortgage crisis. This paper argues that the main reason is the loose monetary policy and the real estate market asset securitization delivers risks to the entire financial system. The rise of interest rates and decline in housing prices eventually led to the outbreak of the crisis.Based on the VAR model series, this chapter applies the empirical test to the infection possibility of the United States subprime mortgage crisis to China's economy from the angle of trade channels and transmission channels. The study comes to a conclusion that the U.S. subprime mortgage crisis will spread through the channels of trade channel to China and subprime mortgage crisis can also be transmitted through the stock market.This paper provides a comprehensive summary of financial crisis early-warning indicator system involved in the academic research literature. Draw on previous studies, this article chooses 23 indicators deriving from the macro-economy, financial system, asset bubbles risk and the global economy to construct the China's financial risk monitoring indicators.The article improves the previous methods of synthesizing the pressure index and establishes the pressure index of currency crisis, banking crisis, asset bubble crisis respectively. According to the comparative study of signal noise ratio and single-variable regression method, this paper argues that the applicability of the two methods is not strong and thinks the Granger causality test methods will do some good to our early warning systems.In this paper, MSI (3)-VAR (1) model has been determined to establish early warning models of the currency crisis, banking crisis and asset bubbles crisis respectively. Early warning models of three markets exhibit the satisfactory simulation results and early warning signals occurs in a reasonable time. This article finds that in the second half of 2008 in China, currency crisis, banking crisis and asset bubble crisis are in a low risk state, which are in line with the actual situation.Combined with the selected indicators in currency crisis, banking crisis and asset bubble crisis, with the help of factor analysis, this article utilizes the SWARCH model to establish the financial risks early warning models, which can describe the overall risk situation and predict the future situations. The outcomes show that the possibility of the outbreak the large-scale financial risk is really slight in the second half of 2008 in China.The results of the study broaden the scope of financial crisis early warning systems and deepen its research. In the context of the deepening U.S. financial crisis, the research outcomes provide useful lessons and are of important practical significance.