Economic Slowdown,Household And Corporate Leverage And Policy Regulation

In recent years,high-housing prices and high debt growth have received extensive attention from academic,industry and government decision-making departments.Although imperative regulation succeeded in restraining housing prices and debt growth under the background of excessive prosperity in the global real estate market,it did not help to stabilize market expectations,and objectively causes market discontinuity and causes a series of risks.In December 2021,the meeting of the Political Bureau of the CPC Central Committee proposed to "promote the healthy development and virtuous cycle of the real estate industry" while continuing the tone of "no speculation in real estate".Therefore,it is imperative to establish continuous,predictable and transparent countercyclical regulation rules for debt and asset prices.Based on the above background,this paper mainly studies the phenomenon of countercyclical rise of household sector leverage and enterprise sector leverage in the stage of macroeconomic downturn and its underlying mechanism.Household sector leverage and corporate sector leverage are not only relatively independent,but also affect each other through macro factors such as interest rates,which constitute two logical main lines.The main contents and research conclusions are as follows:First,based on vector error correction model,the dynamic correlation of housing price,output,interest rate and monetary aggregate is estimated.The research finds that China’s GDP has a long-term and slow downward growth path,and when GDP deviates from the long-term growth path,housing price will rise in the long run,and the high housing price has a strong continuity.Secondly,by constructing a dynamic stochastic general equilibrium model with heterogeneous intertemporal substitution elasticity of household consumption,this paper analyzes the impact of negative total factor productivity impact on the growth of real GDP,house prices and debt after acting on the macroeconomic system.We find that the negative total factor productivity shock is an important reason for the rise of house prices and household debt.The rise of house prices and debt scale is largely determined by the persistence of exogenous impact and the characteristics of the system itself;The rapid rise of house prices and debt during the economic downturn depends to some extent on the heterogeneity of family consumption intertemporal substitution elasticity and less regulated financial intermediaries.Financial intermediaries use the differentiation of family preferences to improve profitability and expand their balance sheet,which in turn creates a large number of housing mortgages to promote the rise of house prices and further expand the differentiation of family preferences.Finally,it forms a dynamic process of mutual strengthening and expansion between family debt and house price,and leads to the differentiation of housing wealth among families;Government departments can alleviate the impact of the above self enhancement mechanism by regulating the leverage of housing loan business of financial intermediaries.The macro prudential policy based on the leverage factor of financial intermediaries has the lowest welfare cost.The persistent impact of total factor productivity will cause significant and lasting polarization between the rich and the poor through the flow of housing wealth among families,making the conventional monetary policy produce a certain effect of wealth redistribution.When evaluating the effect of the policy,we should not only consider the aggregate indicators such as output and inflation gap,but also include the impact on wealth distribution into the trade-offs of advantages and disadvantages.Finally,based on the "moral hazard" motivation of enterprises,this paper constructs a dynamic stochastic general equilibrium model including the holding behavior of enterprises’ cash assets,explains the reasons for insufficient investment and limited effect of monetary policy,and then explores the optimal counter cyclical regulation policy.This model is different from the traditional business cycle model which depends on the mechanism of external financing cost.It is found that the negative TFP impact leads to the increase of cash assets held by enterprises,which changes the distribution of return on Enterprise Investment:banks benefit from lower default rate,so they are more willing to lend,but when the investment is successful,the return obtained by enterprises declines,which inhibits the willingness of enterprises to invest,and finally forms a situation in which the financing constraints are relatively loose but enterprises are unwilling to invest;The driving effect of the reduced financing cost on the enterprise’s investment intention will be offset by the low return on investment caused by the enterprise’s more cash asset holding behavior.Correspondingly,the government’s counter cyclical adjustment policy of expanding public infrastructure has a good effect on the decline of investment and output caused by risk shocks,while it will squeeze out private investment while improving total demand when facing the economic downturn caused by negative total factor productivity shocks.