Asymmetrical Information And Formation Of Macroscopical Financial Risks

Since the 1990s, with economic integration and the springing up of financial globalization tide of the world, the uncertain factor of financial market increases sharply. And potential financial risks become apparent one after another. The financial crisis breaks out again and again. Outwardly, important factors of the forming of the risk and crisis are unordered flow of the capital, the fund flowing into the unproductive department in a large amount, out of step to supervise and open with the financial market, and the assets quality of credit worsened, etc. But if we seek deeper reason through the appearance, we will find that the system factor, the lack of the effective measure, reverse selection and moral hazard that the asymmetrical information causes is a profound reason why financial risks strengthen day by day. According to the typical phenomenon of the incomplete financial market, this paper will choose the corresponding model and probe into the profound reason of production of financial risks under asymmetrical information. This paper is divided into five parts. Part â… has explained the theory of asymmetrical information, and then has discussed the relation between asymmetrical information and risk. It thinks the risk is the lost possibility of suffering caused by uncertainty. And the so-called uncertainty is the incomplete state of a kind of information in fact. If information increases, uncertainty will be reduced and the risk degree is reduced correspondingly. Uncertainty exists objectively, so when people carry on economic policy, it is impossible to know all relevant knowledge and to predict the risk in the future accurately, which determined people will face the risk whenever they engage in any economic activity. Part â…¡analyzes the influence that the asymmetric information of the lending market produces, namely credit rationing. There are two kinds of meaning in credit rationing: Firstly, some people get the loan and another part of people are refused who they even agree higher appended document in all loan applicants. Secondly, the requirement of borrower can only be satisfied partly. Its basic thought is that the prospective earnings of the bank not only depend on loan interest rate but also depend on the risk of the loan. When the bank is unable to observe such information as debtor's investment risk, etc., increasing interest rate can make debtor of low risk withdraw from the lending market, and then it produces the reverse selection; or debtor is lured to invest in high project of risk by high interest, and then causes the morals hazard. But Williamson (1986, 1987) thinks that equilibrium of credit rationing will appear too, so long as the creditor has carried on supervision for the debtor's behavior and produced supervisory cost, and if even it not has an adverse selection and moral hazard. In the lending market of our country, the debt-credit behavior between state-run commercial bank and state-owned enterprise often has credit rationing characteristic. But there is some different from characteristic of credit rationing that model describe in developed lending market. The abuse of a certain degree of credit rationing power of the bank often makes the adverse selection behavior increase and average quality of the loan drops. Meanwhile, the service efficiency of relatively rare credit resources is reduced in consequence of that productive profit rate of the enterprise and bank decline, which finally results in the morals risk behavior: With rate of arrearage rising, the risk degree of both sides increases. Part â…¢have described the macroeconomic effect of credit, and then drawn a conclusion that credit rationing that asymmetrical information produces impact on macroscopical fluctuation. This paper sets up bank equilibrium model of imperfect competition. It analyzes the credit channel of the monetary policy and draws IS/LM model under the imperfect competition condition, and analyzes that the output effect of the credit channel has been strengthened ,which is compared with conduction mechanism result of the pure monetary channel , and then points out that the macroeconomic meaning of the behavior of rationing credit lies in : 1. When irrelevant departments can't supervise a lot of risky enterprises and banks, breaking the law or violation, they invest in the securities and real estate market with some fund, which has aggravated the instability of the financial market. 2. Facing the change of the macroeconomic situation, when the commercial bank perceives the Central Bank tends towards improving the interest rate inorder to contract economy, it will reduce credit because of being afraid of economy declines. This strengthens credit rationing phenomenon that exists originally, but not because of microscopical fluctuation and makes economic recession disasters pile up on one another. On the contrary, when the commercial bank believes that the Central Bank will carry on the expanding economic policy and economic situation is good, they will relax credit through reducing the interest rate and increasing the loan, and adds fuel to the flames for economic expansion. Part â…£draws the macroeconomic importance of financial system according to the above analysis, and then has analyzed asymmetric information and financial system fragility. First, if lending market presents the serious adverse selection, it will collapse. Namely credit demand disappears, and then lending market disappears, which is one extreme phenomenon that lending market does not work. The important meaning of macroeconomics with potential financial collapse lies in: Among IS-LM model, tighten monetary policy makes LM curve move to left, and the interest rate rises, and the aggregate demand reduces. At this moment, when the expectation income of the bank is higher, some investment projects are not lucrative any more. In this high interest rate level, even if the investment projects of some debtors are favorable to social production and welfare, because individual investment is profitless, they have no demand of credit, the lending market collapses. Second, the moral hazard of the bank will cause the financial crisis. The government recessive guarantee and inefficient supervision to the bank and financial institution make the bank and financial institution have serious moral hazard problems. Too much risk fund which is invested the market of assets (real estate and securities), has caused the production of the foam of the assets. Before the foam has not broken, the financial question of the financial institution is concealed by the foam. However, the price of the assets is impossible to rise violently limitlessly. the drop of the assets price make the question of the financial institution surface and force them to stop investing the fund in the assets market, so it cause the further drop of the assets price. People realize financial institution might unable to repay debt, so they unwilling to lend money to them,...