Study On The Equilibrium Of Consumer Credit Market And Its Impact

Consumer credit has played an active role in promoting durable goods consumption, improving residents' consumption and quality of life,stabilizing macro consumer demand, expanding the banking sector and financial innovation since it was officially launched in 1999. After the world financial crisis in 2008, China faced a series of problems, such as contraction in external demand, decrease in working population and so on. The continuous fermentation of these problems has led to a new normal state of our economic development, which is GDP growth speeds from high to medium. At present, China's reform of the supply front during the new normal is a comprehensive strategic deployment. As an important tool of stabilizing macro consumer demand,consumer credit is conducive to ensuring moderate expansion of aggregate demand, and the smooth realization of the reform goals.As the management organization of consumer credit market, PBC and CBRC should ensure the stable development of the consumer credit market, promote and expand residents' consumption in the long-run, and manage volatility, control market risks in the short run. And as macroeconomic management organization, PBC and CBRC should also use consumer credit tools to stabilize aggregate demand and reduce the negative impact of aggregate demand on economic growth. With the increase of the scale of consumption credit and the enlargement of regional difference in China,management organizations must deepen understandings of the consumer credit market if they want to manage the market effectively. Many researches have studied the influence of single (or several) factors on the equilibrium of consumer credit market through empirical analysis. There is no systematic nor theoretical framework for the study of the short and long term changes in the consumer credit market equilibrium. How does the supply and demand of consumer credit market determine the equilibrium? How does the market equilibrium change in the short and long run? How can the management organization effectively manage the consumer credit market and use consumer credit instruments? The basic starting point of this paper is to answer these questions.In this dissertation, on the basis of practical experience, a model is established based on the intertemporal consumption model with liquidity constraints, and then solve it by numerical simulation. Also, the paper will establish a theoretical framework to analyze the equilibrium and change of consumer credit market. We will use the framework to study the development of China's consumer credit market and help the management organization effectively manage the consumer credit market.The full dissertation is divided into six chapters. Chapter 1 is the introduction, and Chapter 2 is literature review. These two parts introduce concepts and studies on the effects of consumer credit market equilibrium and consumer credit on consumer behaviors. Chapter 3 establishes the theoretical model, and analyze how does the supply and demand determine the equilibrium of the market. Chapter 4 extends the model established in the previous chapter to the category of time series, describes the long-run trends and short-run fluctuations in the equilibrium, and studies the development process of the market. In chapter 5, the above theoretical results are applied to the study of the development of China's consumer credit market, and we will analyze the overall development and its segment market,and the overall development of interprovincial market of China. Chapter 6 are conclusions and policy recommendations.The main conclusions and innovations are as follows:First, according to more realistic liquidity constraints assumptions and income process assumptions, this paper add a total to the individual intertemporal consumption model and build a representative consumer of infinite life model. By numerical simulation, we can solve the equilibrium of consumer credit market, and get the relation of market supply, demand and equilibrium. The paper finds that equilibrium is equal to supply,and is less than the total potential demand. Market equilibrium is determined by aggregate supply.Second, the factors that influence the equilibrium of consumer credit market can be divided into income factors and non-income factors. The ratio of consumer credit balance to disposable income (dt/Yt) reflects the overall status of non-income factors in the current consumer credit market. Backtracking through time series data, the analysis of market equilibrium will be extended to the category of time series,so as to obtain the historical changes of non-income factors. Based on these changes in non-income factors, the paper divides the long-run development of consumer credit market into three forms: the expansion form, the stable form and the shrinking form. In the process of development, there are some specific rules for the change of market form. The ideal form is that the early stage of market belongs to expansion form,once develop into a certain extent, the market will change into stable form. Both the expansion and the shrinking forms are unstable transition forms,they will all turn into stable form. In the three forms, non-income factors have short-run fluctuations besides the long-run trends, and the short-run fluctuations also can be divided into the expansion form, the stable form and the shrinking form based on the short-run changes of dt/Yt.Third, reviewing the development process of China's consumer credit market in the view of non-income factors, this paper finds two facts. One, China's consumer credit market has been expanding since its establishment, and its non-income factors continue to improve. Compare the dt/Yt of China in 2015 to those major developed countries in the world,and we find although China's consumer credit market is very young, and per-capita-consumer-credit-balance is low, non-income factors are not lagging behind. Two, the development of China's inter provincial consumer credit market is unbalanced. From the balance of consumer credit,it shows a state that the eastern part is relatively developed, and the western part is backward. From the non-income factors, first big cities, municipalities, economically developed provinces on the southeast coast,and frontier minority provinces are ideal. In Northeast China,North China, central China and South Central China, non-income factors lag behind,and market supply is underdeveloped, or, consumer culture is more conservative.The policy implications of this paper are:First, the development of consumer credit market is bound to form changes.China's consumer credit market has been expanding since its establishment. dt/Yt continues to rise . In 2016, the figure had reached 20.67%,not inferior to the United States,Britain and other developed countries at the same term. Yet dt/Yt can't keeps rising forever. China's consumer credit market is likely to be in a critical form of expansion into stable.Second, from the non-income factors, the differences between interprovincial markets of China is not the same as we thought that "eastern part is developed, and the western part is backward." The differences of non-income factors in Chinese inter provincial market are analyzed,and in non-housing consumer credit market,the reason why frontier minority provinces are ideal ,while in Northeast China, North China,central China and South Central China, non-income factors lag behind, will be find.According to the actual situation of the provinces, differentiated and targeted management measures should be implemented, which will help the development of non-housing consumer credit market, so as to solve the actual problems of the residents of the provinces, and boost consumer credit across the country.