The Macro Impact Of Residents' Credit From The Perspective Of Balance Sheet

In recent years,with the rapid credit expansion of Chinese household sector,the constantly accumulated debt risk is drawing increasingly attention from public.The outbreak of the financial crisis in 2008 made central banks realize that the risks of macro sectors are closely related.It is an objective requirement to prevent and resolve major risks by scientifically evaluating the credit risk of Chinese household sector and accurately measuring the impact of credit expansion in the whole economic system,which is helpful to understand the role of residents' credit in the macroeconomic cycle.Using the analysis paradigm of macro balance sheet,this dissertation investigates the above effects systematically.By measuring and internationally comparing macro balance sheets,this study assesses the “bottleneck” and potential influence of the allocation of residents' assets(credit)from the dual dimensions of “stock” and “flow”.By combining classical economic hypothesis and the macro reality of China,this dissertation elaborates the drivers of the change of the household balance sheet theoretically,and provides empirical evidence based on the micro-level survey data.Based on Minsky's financial instability hypothesis,this dissertation constructs “Minsky's leverage ratio” to measure the debt repayment pressure in household sector from the perspective of “flow”,and empirically tests the impact of the leverage on consumption growth,economic recession and financial crisis by using transnational panel data from 1970 to 2019.Moreover,the influence of the evolution of the core indicators of the balance sheet on the “consumption savings” path of the residents is prejudged by constructing a dynamic differential equation system of the core indicators such as debt-income ratio of household sector and making the scenario analysis.Using the classic five-sector stock flow consistent model(SFC)of Post Keynesian,this dissertation further explores the impact of accelerated credit growth in the household sector on the actual output,consumption level,price level and other economic sectors.Finally,this dissertation uses the CFPS2012-2018 and CHFS2013-2017 survey data to investigate possible mechanisms of how residents' credit affects consumption in macro analysis,providing empirical evidence at micro-level.The main conclusions are as follows:First,from the perspective of “stock”,although the credit growth of China household sector is experiencing excessively rapid growth in recent years,the debt scale and debt repayment pressure are at a moderate level when compared with those in other countries,and the balance sheet is highly stable.However,due to obvious weakness in asset allocation,for instance,the proportion of real estate and “cash” assets is relatively large,the cash flow generating ability of assets is significantly insufficient.From the perspective of “flow”,with the rapid increase of rigid expenditure of “repayment of principal and interest” of residents' liabilities,residents' “inflow-outflow” pressure is constantly increasing,which poses a critical obstacle to the expansion of consumption.Second,the evolution of the balance sheet of household sector in China is closely related to the economic transformation and institutional change,which is endogenous to macro system.In general,the structural optimization of household balance sheet is taking place,thanks to the transformation and upgrading of the service industry,the rapid development of digital economy and inclusive finance,and the gradual relaxation of financial repression.Moreover,the construction of financial consulting market and the implementation of residents' financial literacy improvement plan also contributed to the improvement of the asset allocation efficiency of households and the prevention of the risk of “excessive debt”.Third,the results of Minsky leverage ratio show that the debt service pressure of household sector in China has continued to grow since the financial crisis,mainly due to the contribution of housing loans and other medium and long-term loans.Through international comparison,this dissertation found that the increase of Minsky leverage ratio is closely related to the outbreak of the financial crisis.And the empirical evidence of transnational data further verifies the above viewpoint,in addition to significantly affecting the outbreak of “crisis”,the rise of Minsky leverage ratio also inhibits the growth of consumption and explains the shrinked consumption effectively.Fourth,the results of the single sector evolution model show that we cannot rely on adding additional credit to maintain the “inflow-outflow” balance in the household sector,which will accelerate to trigger the “systemic financial risk”.The numerical simulation results show that if only one core variable were to respond to the current“inflow-outflow” pressure of the household sector,the forced deceleration of savings has the best effect.Obviously,the decline in the growth rate of real estate investment is more conducive to improving the capital flow statement of the household sector.On the contrary,if the growth rate of real estate investment is further accelerated,the growth rate of consumption will decline rapidly.Fifth,after taking more sectors into consideration,the SFC model show that if the“exogeneity” of credit growth rate of the household sector increases by 8%,the debt level and debt repayment pressure of the household sector will jump to a higher steady state,but the overall pressure is under control.In the short run,accelerated credit growth will lead to a higher level of real output and consumption,but in the medium and long term,it will converge to a lower steady state.The banking system is capable of resisting risk when subject to the growth of residents' credit,and the capital adequacy ratio will not be affected.Although the liquidity ratio fluctuates,it will soon converge to the initial value endogenously.Loan interest rates will continue to decline and converge to a lower steady state.The government deficit ratio and debt ratio will decrease in the short term,but may jump to a higher level in medium and long run.Finally,in terms of micro mechanism,the short-term credit instruments represented by credit cards mainly improve household consumption by easing liquidity constraints.The medium and long-term credit instruments represented by mortgages have changed both sides of residents' balance sheet.From the perspective of “stock”,the net wealth effect brought by the rise of house prices is conducive to boost consumption;however,from the perspective of “flow”,the rigid expenditure of the repayment of principal and interest has a negative impact on consumption in the medium and long run,and this inhibition effect is more significant in “rigid demand”households.Based on the quasi-natural experiment of monetized shed reform,it is also found that demolition causally has a positive promoting effect on household consumption.However,compared with the families whose housing assets proportion and debt level decreased,the growth rate of decreased significantly for the families whose housing assets proportion and debt scale increased after demolition.This shows that purchasing houses with mortgages may inhibit consumption.The results show that the credit expansion of the household sector has systematic and significant impact on the macro economy,especially on consumption.The Fifth Plenary Session of the 19 th CPC Central Committee proposed that “it is necessary to accelerate the construction of a new development pattern,taking the domestic circulation as the main body,the domestic and international double circulation promoting each other”.The consumption-driven economy is the key to the construction of the “double circulation” pattern.Therefore,it is necessary for the central government to improve the macro balance sheet statistical system,reasonably assess the debt risk of household sector,and more accurately analyze the impact of residents' credit on potential output and consumption expenditure;constantly improve the construction of financial market system,strengthen the construction of financial infrastructure,expand the investment channels of asset market,and make up for the short board of residents' assets allocation.We should improve the macro prudential policy framework,adhere to the macro prudential perspective to prevent the debt risk of the household sector,especially strictly control the rapid expansion of the scale of housing loans.It is of great significance to adhere to the policy of “residential purpose instead of speculative purpose” and stick to the neutral and tight direction of real estate regulation and prevent the risk of real estate bubble from infiltrating into the financial system through residents' credit.All in all,the most important thing is to speed up the supply-side reform,optimize income distribution and social security system,promote employment,improve the consumption environment,reduce the overall “inflow-outflow” pressure of residents' capital flow statement,improve the residents' willingness to consume fundamentally,and enhance the basic role of consumption in high-quality macroeconomic development.