Empirical Study On The Relationship Between Asset Price Fluctuation And Bank Fragility In China

In the 21st century,the impact on a country's financial system from the asset prices fluctuations is developing as the constantly changes of the international economic.The impact of financial crisis will be fatal specially in developing China,which is still dominated by commercial banks in the financial system.A close relationship will exist between the financial crisis and development of China's commercial banks.Therefore,set up a China's financial risk monitoring and early-warning criteria will be meaningful for our country's capital market and financial system.In this paper,we are researching into the channel between the capital market and commercial banks base on economic theory and statistical methods.We firstly set up a non-structural vector auto-regression model.Then we use econometrics analytical method such as Unit Root Test,Cointegration Test,Granger Causality Test,Impulse Response Function,and Variance Decomposition to analyze the relationship between the variables.Finally we draw some conclusions:Both the stock and real estate price fluctuation has significant impacts on the bank fragility in China,the real estate is more significant;The negative impact on the micro-finance from asset price fluctuation has a long lag period,so risk monitoring should be carried out in advance;There is a obviously substitution effect between the real estate and the stock market,but the wealth effect would be more magnified with the capital market's development.There are several creative aspects in this paper:1.Set up a dynamic model to carry out a comprehensive analysis of the three variables is better than considering only a single factor.2.Use variety of methods to demonstrate the impact mechanism.3.VAR equations help us to study more variable contact between the objectives.4.Give some advises to the Chinese risk monitoring system building. The deficiencies of this paper are:1.Since the VAR model is usually lack of economic theory;some of the estimated coefficients are lack of expiations.2. The selection of indicators in the bank fragility is empirical.3.I regret that there are only incomplete data in the Chinese capital and financial markets for more than a decade.