A Study On The Economic Growth Effect Of China’s Macro Leverage Ratio

The macro leverage ratio is one of the important factors that can not be ignored in the development of China’s economy.Since the 2008 global financial crisis,governments have implemented extremely loose monetary and fiscal policies,resulting in a rapid rise in debt balance as a share of GDP,and high leverage risk has become a major problem facing the global economy.With the slow recovery of the world economy and the steady growth of the US economy,the Federal Reserve’s interest rate increase will inevitably have a spillover effect on the global economy,and deleveraging is becoming a global trend.At the same time,the continuous fermentation of Sino-US trade friction makes the external environment face great uncertainty and potential risks.In this context,China regards the effect of deleveraging as an important measure of supply-side structural reform and financial risk prevention and control.As an important task of supply-side structural reform,"deleveraging" was established at the Central Economic Work Conference in 2015.In 2016,it issued the "opinions on actively and steadily reducing the leverage ratio of enterprises".In July 2017,the Fifth National Conference on Financial Work again proposed to actively and steadily promote economic deleveraging,pointing out that the relationship between "stable growth,adjusting the structure and controlling the total amount" should be handled properly.The Nineteenth National Congress of the Communist Party of China has made it clear that China’s economy has entered a new historical period of high-speed growth to high-quality development.In order to implement the spirit of the Nineteenth National Congress of the CPC,the meeting of the Political Bureau of the Central Committee clearly pointed out that local government debt risk should be prevented and controlled in an orderly manner,so as to control the macro-leverage ratio more effectively.The Central Committee on Finance and Economics held in 2018 pointed out that we should take structural deleveraging as the basic idea and strive to achieve macro-leverage stability and gradual decline.Based on the intricate situation at home and abroad,the specific contents of this study are as follows:Firstly,with the deepening of financial reform and the continuous development of financial innovation,financing tools become more diversified,and the financing structure of the real economy has undergone profound evolution.Direct financing represented by stocks and bonds is playing an increasingly important role.However,the imbalance of social financing structure between "hot" virtual economy and "cold" real economy has become an unavoidable problem in China’s macroeconomic operation.In order to effectively balance the relationship between deleveraging and the reasonable financing demand of real economy and enhance the ability of financial service real economy,our research is based on panel data of 31 provinces(regions and cities)in China.It is tested that the panel data have two-way causality,including bank credit financing,stock and bond financing and real economy.Economic impact also exists on the impact of real economy on different financing methods.After decomposing the trend of social financing scale,we find that the fluctuation amplitude has changed dramatically since the global financial crisis,which means that financial deepening leads to the increase of financing links,chain elongation and financial risks.At the same time,the Moran index test of the spatial correlation of real investment,bank credit financing,financial market financing and other variables shows that the indicators of each variable have obvious positive spatial dependence.By introducing Spatial Durbin Model to study the interaction of financing structure to the real economy,regional spatial interaction in national,eastern,central and western economic development entities were compared.Results showed that bank credit,stocks and bonds of financing methods are significantly for promoting the development of the real economy,but there is a clear spatial dependence,policy relevance and imbalance characteristics.Secondly,the sharp rise of macro-enterprise leverage has increased the vulnerability of China’s economy and finance significantly,and has become a major concern in the stage of China’s economic transformation.Enterprise leverage is closely related to economic growth,asset prices and other factors.These factors determine the dynamic development path and direction of future debt,affect the transmission mechanism of monetary policy and economic efficiency,and are closely related to financial stability.In order to resolve the hazards of excessive leverage and asset price bubbles to the real economy and the possible systemic risks,this part of the study is based on the economic theory of mortgage-backed constraint model,that is,enterprises can finance externally through issuing bonds and bank loans when internal financing is insufficient.Capital shall impose a ceiling on its leverage ratio to ensure that the total amount of outstanding bonds and working capital loans shall not exceed the corresponding proportion of the market value of the mortgage-backed assets.Use of the Markov regime switching model to examine the structural characteristics of corporate leverage ratio,economic growth and asset prices.And analysis the degree,path and convergence of the impact of mutual transmission of various factors through the generalized impulse response.Research shows that it is easy to raise corporate leverage ratio,but difficulty to reduce.Corporate leverage is countercyclical with economic growth,but a procyclical with asset prices.There are significant asymmetric effects with in corporate leverage ratio,economic growth and asset prices.In addition,in order to ensure the robustness and reliability of the dynamic characteristic conclusion of the influence of enterprise leverage on economic cycle and asset price,the robustness test and analysis of recursive parameters are carried out.Thirdly,the local government debt problem not only agglomerates the potential factors that lead to local systemic risks,but also brings pressure to the stable operation of the macro-economy.It also causes unreasonable allocation of state-owned economic resources,which restricts the vitality and high-quality development of the national economy.In order to better evaluate and monitor the regional imbalance and risk of local government debt,this part of the study On the basis of Barro’s endogenous economic growth model,this paper introduces a panel smooth transition regression mechanism,and investigates the smooth transition effect of local debt on economic development and its regional heterogeneity;its purpose is to achieve high quality development in the process of preventing and controlling local government debt risk.The results show that with the increase of the government’s new debt rate,the growth rate of per capita GDP shows an inverted "trend" of rising first and then decreasing.The nuclear density distribution of new debt ratios in eastern,central and western regions also reflects the dynamic evolution process of local debt and regional differences.At the same time,the study also reveals some provinces debt adjustment,solvency,structural imbalance may lead to risk exposure problems.the threshold of the local government’s average debt rate is 8%;when the debt rate is below 8%,the increase of local government’s debt will significantly increase the level of economic development;when the debt rate is higher than 8%,the local government’s debt will smooth transfer from high speed influence mechanism to low speed mechanism.In addition,the degree of regional imbalance is obvious and the economic development elasticity of debt in typical provinces has prominent differentiation characteristics.Fourthly,the impact of the rising leverage rate and the deterioration of household liquidity constraints on consumption upgrading and economic output should not be ignored.We should be alert to the potential financial risks and economic downturn risks.In order to enhance the basic role of consumption in stimulating the economy and improve the long-term mechanism of sustained expansion of domestic demand,our research takes household balance sheet as the basis of economic theory and model,and based on the extended linear expenditure system model ELES obtains the elasticity of demand for various types of consumer goods and takes the proportion of high-level consumer spending as the basis.For residents to upgrade consumption indicators.and uses the TVP-SV-FAVAR model to test the time-varying characteristics of the residents’ leverage ratio.The results show that the continuous climbing of the residents’ leverage ratio and the significant deterioration of family liquidity constraints can not affect the consumption upgrading and economic output.Neglect;residents’ leverage in the short term helps to upgrade the consumption,but this effect is not sustainable in the long term as a negative effect;residents’ leverage has a certain inhibitory effect on economic output in a short period of time,while in the long run it has a sustained role in promoting economic output;housing assets play a role in the problem of leveraging.The wealth effect and collateral value-added effect of the important role are greater than the inhibitory effect caused by the liquidity constraint.Therefore,attention should be paid to the "grey rhino" risk of local governments and state-owned enterprises with a high proportion of debt,as well as the "black swan" risk of household debt.Last but not least,with the gradual evolution of the de-leveraging process,the real economic financing costs have increased,and the financial market has become more volatile,which have a certain degree of tightening effect on economic development.At the same time,the accumulation of high leverage risk and the complex adjustment of the transmission path have become the resistance to sustained economic growth.And how to balance the steady growth and deleveraging through monetary policy is imminent.In view of this,our study introduces the dynamic adjustment model of macro-leverage into the framework of monetary policy theory,combines the new Keynesian Phillips curve and the aggregate demand curve,constructs the TVP-SV-VAR model,and uses the Markov chain Monte Carlo MCMC algorithm to estimate the time-varying,structural differences of monetary policy in the balance process between stable growth and deleveraging.Its purpose is to achieve high quality economic growth in the process of scientific deleveraging.The results show that monetary policy has significant time-varying and nonlinear effects among different sectors,but its regulatory effect is gradually weakening.Corporation and household sectors are more sensitive to monetary policy effects,but the government is not sensitive.The adjustment speed of corporation leverage rate has slowed down and entered the inertia interval,the government and household leverage rate has gradually accelerated adjustment.This paper puts forward some policy suggestions,such as fully coordinate monetary policy and macro prudential policy in order to jointly deal with systemic financial risks.To sum up,the macro leverage ratio is a total perspective,but it often tends to conceal its structural problems.Therefore,deleveraging should choose a structural path to avoid excessive use of one-size-fits-all deleveraging measures at the aggregate level.Whether it is the high-leveraged state-owned enterprises or the implicit debt of the local government itself,as well as the rapidly rising residential debt in recent years,we should adhere to the general tone of steady progress in the process of de-leveraging,so as to make macro-leverage sustainable.In the context of effective prevention and resolution of major risks,monetary policy should be robust and neutral.Of course,we should not rely too much on monetary policy to solve the structural problems of institutional nature.At the same time,we should coordinate the core functions of macro-prudence and fiscal policy restructuring so as to prevent aggregate demand from falling too fast,optimize the leverage structure while de-leveraging and make up for shortcomings.The path of "de-leveraging" in structure and "superior leveraging" in efficiency promotes the high-quality development of China’s economy.