Research On The Relationship Between The Assets Price Volatility And The Regional Financial Risk

Since the global financial crisis in 2008,scholars have deeply realized the importance of the impact of asset price volatility on the economic and financial system.With the continuous deepening of world financial liberalization,the monetary easing policies of Western developed countries led by the United States have increased continued,and the price volatility of major global assets have become more and more intense.It laid hidden dangers to the security and stability of some countries' financial systems.If the regional financial risks are out of control,triggering a regional financial crisis,it will have a chain of negative effects on the entire country,and even bring heavy disasters to the world economy.Therefore,the study of financial risks has become an important topic in various countries.China is a developing country,regional development in China is uneven.The economic foundations,resource endowments,and development mode of various regions in China are not the same,that leads to differences in the performance of financial risks in regions of our country.At present,there is rarely on discussions about regional financial risks in China,and the research from the perspective of asset prices and their relationship is relatively scarce.This article studies and analyzes regional financial risks from the perspective of asset prices which is an important factor that triggers financial risks,in order to supplement the relevant theories of regional financial risks.And then according to the relationship between asset price fluctuations and financial risks at the regional level to give some policy recommendations which is conform to my country's national conditions.Through analysis,this article believes that regional financial risks are all kinds of risks that hinder the operation of the regional financial system in the region.First,I started with the characteristics of regional financial system operations,focus on identifying the types of financial risks in the region,and clarify the relationship between economic entities,financial institutions and regional financial risks in the region.Then I classified the regional assets into three types of assets,real estate,equity,and local government-related bonds,and analyzed the relationship between various asset prices and regional financial risks.After analyzing in this article,I found that asset price volatility is the fuse that triggers regional financial risks,and it makes financial risks to spread quickly in the regional financial system through the linkage of various financial risks in the region.The concentration of regional financial risks makes regional financial risks concentrated in the banking sector which has the core position of the regional financial system.The banking risks would lead to a regional banking crisis that would become an initial manifestation of the financial crisis.The contagiousness of regional financial risks will lead to the spread of financial risks outside the region.This extremely strong contagion is the main cause of macro-financial risks and even crises.I pointed out that the various financial risks in the region are out of control will usually manifest themselves in the form of debt default.At present in China,there are four aspects which may trigger debt default are: regional bonds,real estate,corporate equity pledges and local government debt.I established a general equilibrium model in this article with three types of assets,real estate,equity,and government-related bonds to discusses the relationship between various assets in the region,and analyzed the mechanism of the impact of various asset price fluctuations on regional financial risks.In addition,in the process of numerical simulation,I extended the maturity of government-related bonds,the result showed that a longer holding maturity will make regional financial risks more sensitive to changes in various asset prices.Although extending the maturity of government-related bonds can temporarily relieve the debt pressure of local governments,the continuous accumulation of regional financial risks will more harmful for financial institutions in a long run.On the basis of theoretical research,this paper conducted empirical testing: First,using the data of 30 provinces and the dynamic panel model of systematic GMM estimation,the results showed that real estate price,regional equity price,and local government-related bond price will affect the region financial risks.The extent to which regional financial risks respond to the prices of related assets is affected by the size of the region's use of related assets for financing.Secondly,this article conducted empirical tests on some provinces using vector autoregressive models based on different risk characteristics of regions.The results showed that different regions have different risk characteristics due to different development models,and the impact of various asset prices in different regions on regional financial risks is also different.Third,I used the TVP-VAR model in this article to conduct empirical analysis to verify the impact of various asset price volatility on regional financial risks with economic volatility.The empirical results showed that the impact of asset price volatility on regional financial risks is related to the local economic conditions.When the regional economy goes down,asset price volatility will have a more dramatic impact on regional financial risks.The most significant feature of regional financial risks is contagion.In order to explore the contagion mechanism of regional financial risks,I expanded the single-region model into tworegion model in this article,and introduced inter-bank lending and trade-exchange between two regions into the model.In order to summarize the mechanism of financial risk contagion between regions,this article made a negative shock on one region to increase the financial risk in this region,observes the changes in the prices of related assets and the related indicators of regional financial system in another region.And basing on our model,I made the numerical simulation of the trade channels and capital flow channels between regions.The result showed that the two channels have an impact on the financial risk contagion between regions: the degree of elasticity of substitution of intermediate products and the degree of capital flow in the process influence the contagiousness of financial risks between regions,and the flexibility of product substitution and the degree of capital flow are positively related to the contagiousness of regional risks.This article gave relevant policy recommendations based on the conclusions of the research.First of all,in the process of preventing and controlling regional financial risks,great attention should be paid to the volatility of various asset prices in the region and the scale of financing using related assets.Secondly,focused risk prevention and control should be carried out according to the characteristics of the region.Because of the economic environment,development mode,resource environment,financing structure,etc.of various regions in China are different,the risk points of their respective assets are also different in regions.Third,an effective mean to reduce the risk of regional government debt is to gradually reduce the stock of local government debt.Fourth,more attention should be paid to financial risks in resourcebased backward areas.Resource-based intermediate products have low substitution elasticity in the process of inter-regional trade,so the financial risks generated by the main production areas of these products will be more contagious to other regions.Fifth,strengthen the supervision of inter-bank lending platforms to effectively control the flow of funds between regions when regional risks increase.Increasing inter-bank lending will make financial risks more contagious between the two regions.Therefore,when financial risks in one region increase,relevant regulatory authorities should strengthen the supervision of the flow of funds in this region.