Research On Dynamic Effect Of Financial Instability On Qingdao Regional Economic

So far there is no uniform academic definition of financial instability, therefore this paper discuss financial instability from functional perspective, based on Hyman P. Minsky's financial instability hypothesis and R. Merton and Z. Bodie's functional financial system. Minsky's financial instability hypothesis clarify that the financial system is inherently unstable, through his two core theorems. Furthermore, the endogenous financial instability is the source of economic fluctuations. According to R. Merton and Z. Bodie's functional financial system, the basic functions of the financial system can be divided into six categories, and the effect of financial instability will inevitably lead the financial system does not work correctly. Thence we can observe financial instability from the state of financial system. From functional perspective, in this paper financial instability is defined as the following: financial instability means is in the non-steady state in which financial system is unable to effectively carry out its critical functions. Financial instability hypothesis has the assumptions that financial instability is the steady state of financial system. Then financial instability can be divided into three main levels:hidden financial instability, dominant financial instability, and financial crisis. The development of economic not only blurred the definition between the different levels, adds to the instability of the external performance, but also improve the rate of conversion between different levels.As the normal state of the financial system, financial instability not only cause the world's financial structure and institutional arrangements, but also impact on regional economic trends and developments through direct or indirect route. Financial instability impact the regional economic mainly through two ways. Firstly, macro-financial instability affect macro economy through the mechanism of financial markets, on the other side, macroeconomic constraints development of regional economy through unique way. Secondly, macro-financial instability directly impact regional economic fluctuations, but the fluctuations of regional economic to macro-financial instability is weak. Taking that premise into account, this paper uses varying parameter model to measure the effect of macro-financial instability on Qingdao GDP. At the same time, empirical method is utilized to inspect the dynamic effect of macro-financial instability, which provide new idea for studying of macro-financial factors.At the macro level, the measure of financial instability focuses on financial markets, financial institutions and financial monitoring system. In this paper, we use the stock market return and exchange rate as the indicators which reflect capital market and foreign exchange market, take the ratio of deposits and loans as the indexes of the banking system, use mobility indicators and interest rate to monitor the overall situation of the financial system. Empirical method is utilized to inspect the dynamic effect of macro-financial instability, and make the conclusions as the follow: Qingdao Economic is most sensitive to the changes of real interest rates; the volume of money supply M2 and the total loans of financial institutions bellows; the actual changes rate and stock market rate of return changes is the least.Based on the research of Qingdao macro, state space model is constructed to inspect the effect of macro-financial instability on Qingdao economic of sectors, which make conclusions as follow:Overall, macro-financial instability affect consumption and government spending of more obviously than other economic variables in Qingdao; all economic variables of Qingdao are sensitive to real interest rates,while other variables are different.