A Study On Financial Fragility Based On Macro Effects:Theory And Evidence

Because of the traditional theory of financial crisis can not explain the current financial crisis, financial fragility theory came into being. How to alleviate the financial fragility and prevent the financial crisis is a common concern of the theorists and practitioners. Based on the theory of financial fragility, this thesis studies the factors inducing the financial fragility, the macro effect and the macro policy supervision.Discusses the financial fragility characteristics in mechanism and pathway, asset price fluctuations on the financial fragility of the marketization of interest rate and credit mismatch from the perspective of macro effect, and the monetary authorities to focus on financial stability objectives to strengthen the macro prudential policy and monetary policy coordination collocation, the prevention of financial risks.First of all, based on the theory of asset price fluctuation, and the model of capital circulation, using 2010Q4 - 2015Q4 quarter data,Construct containing the financial markets, a number of assets price fluctuation FCI index and commercial bank fragility proxy variables, between multiple linear regression and the VAR model is established,and through the impulse response function, index (FCI) expressions are derived.Consistent results show that, regardless of the linear regression model and VAR model,the real estate price, price fluctuation of RMB effective exchange rate is caused by a commercial bank fragility of the main disturbance sources with the disturbance with values up to 71%.At the same time, it is concluded that the FCI index is the single reason for the weakness of commercial banks Granger.Second, Based on the theory of interest rate liberalization, this thesis discusses the impact of interest rate liberalization on financial fragility, and focuses on the macro effects of financial fragility. Using 2005Q1 -2015Q1, based on the principle of financial accelerator, this paper examines the impact of interest rate liberalization on China's financial fragility. The results show that, in the face of interest rate shocks,different types of commercial banks based on vulnerability not only have significant differences in the macro effect, but also show a significant nonlinear, asymmetric characteristics. The corresponding policy meaning is the central bank's monetary policy especially the formulation and implementation of interest rate policy, should be based on the state contingent external finance premium, take the difference of unequal means of operation, in order to improve the accuracy of monetary policy, effective and comprehensive.Third, Based on the reality of China's economy, while relaxing the "perfect bank",and perfect enterprise homogeneity assumption, commercial banks for different enterprises "two yuan" credit policy introduced DNK - DSGE model, using 2006Q1 -2015Q4 quarter data to examine the macro effect of China's financial fragility and its characteristics. The simulation results show markedly differences in the significance of the macro effect under the different constraint conditions in financial markets. Because of the releasing of the "perfect bank" assumption,a tiny external impact through balances sheet of enterprises and banks, which constitute of a double expansion(contraction) mechanism, thereby leading to a more pronounced macro effect.However,the existence of the Chinese typical "dual" credit mismatch between state-owned enterprises and private enterprises , resulted in the underestimated overall leverage elastic of external financing risk premium, which has certain offset effect to the macro effect. The results also show that the superimposed effect degrees of external shocks from credit mismatch and commercial bank vulnerability are different,especially in the effect of monetary policy supervision. In addition, the monetary policy performs the best in controlling inflation but poor in regulating output under the NDK-DSGE model. The superimposed effect of external shocks from credit mismatch and commercial bank vulnerability has transitivity and sustainability, and the persistent lasts one or two quarters. Based on the results, the theoretical and policy implications are discussed and the directions for further studies are also pointed out in this paper.In addition, based on the macro effects of financial fragility, the distinction between monetary policy objectives include financial stability in two cases. In the analysis of the traditional monetary policy framework does not contain the goal of financial stability, the use of Ball model, the construction of the asset price volatility and monetary policy response between the theoretical model. The model shows that the implementation of the central bank monetary policy to take the optimal interest rate depends not only on the current output and inflation gap, but also depends on the asset price changes and random disturbance, and using 2006Q1 - 2015Q4 quarter data to analysis . Based on the above theoretical and empirical analysis, this paper probes into the choice of traditional monetary policy framework in China, and puts forward the corresponding strategies for monetary policy to intervene in asset price volatility. In the analysis of the new monetary policy framework including financial stability objectives.Based on Agur (2009) and Ague and Demertzis (2010) model framework, the paper analyzes the influence of financial stability on the central bank's monetary policy rules in detail. The results show that if the central bank's monetary policy rules do not consider the financial stability objectives will lead to optimal interest rates systematically underestimated, the cause of this underestimation is perhaps the failure to long-term consideration of financial fragility caused by inflation costs and potential loss of output, a narrow and lag of the monetary policy decision. Therefore, considering the reality of financial fragility, the current monetary policy should make the necessary response to financial fragility.Finally, using 2006Q1 -2016Q1 data, by distinguishing between patient and non patient family family, considering the financial fragility of reality, into the financial accelerator mechanism, constructs the DNK-DSGE model of the closed economy,studied traditional external shocks and non traditional external shocks have macro effects and how to the central bank of the economy in the face of the effect of macro financial fragility when adopt macro policy coordination collocation. The simulation results show that when the economy is facing the financial and real estate demand and other non-traditional external shocks, taking into account the financial fragility, the macro effects of economic shocks, the response time is longer, the biggest impact in economic time than without considering the financial fragility under the impact of delayed 2-3 quarter, which means that the considering the financial fragility characteristics, enhance the role of the financial accelerator, the macro effects of external shocks more persistent. At the same time, the simulation results show that the single monetary policy can effectively guard against economic fluctuations under the traditional external shocks. Under the traditional external shocks, the coordination of macro Prudential policy and monetary policy can effectively prevent the economic fluctuations.The main innovation of the thesis:First, by constructing the FCI composite index as a proxy for the market a variety of asset prices, combined with analysis of influence of various asset price volatility of financial fragility, the shortcoming of traditional single asset prices;Second, based on the interest rate market the theory, for the first time into the analysis frame of interbank market, detect the effect of China's financial fragility, and based on China's commercial banks in different market structure, for the first time on the macro effects of different types of commercial banks, whether there are significant differences for empirical test;Third, also relax the "implied assumption of perfect bank and enterprise quality,considering the financial fragility of the macro effect of enterprise credit mismatch,make the DNK-DSGE model more consistent with the real economy, enhance the theory model of explanation;Fourth, relax the "perfect bank" hypothesis and consider the financial fragility characteristics under the assumption of constructing the DNK-DSGE model,discrimination test traditional external shocks and non traditional external shocks have macro effects and how to the central bank of the economy in the face of the effect of macro financial fragility when adopt macro policy coordination collocation.