Measure Of Macro-financial Instability Model And Empirical Research

Financial instability means during the unstable state,the financial system unable to carry out its critical functions effectively.The modern theory of financial instability based on the traditional theory(monetary stability and banking institutions) which try to explore the nature of the crisis, put forward a core proposition named "economic containing financial instability".Hyman Minsky,who put forward the financial instability hypothesis,based on the concern that the financial instability of the transmission mechanism, stressing that the financial particularly of the currency as an endogenous variable in economic growth model,the changes in the economic cycle is due to financial factors.Given a detailed analysis of how the financial impact to behavior of economic entities in reality.Financial instability,the negative effect on economic development has been widly spread concern in theoretical circle and in-depth research,especially the highest level of its manifestations—financial crisis has taught us the harm to the world's economy,making a measure of financial instability and the study of relevent influence factors is particularly important.Meanwhile,the financial instability as an common operation economic system,caused a large impact to the financial structure and institutional arrangement.The research will benefit to the management of the national economy.In the context of economic and financial globalization,China's financial liberalization process is very fast,as the gradual acceleration opening our capital markets,as the world's financial markets have become more and more closely,economic development,especially the financial markets face an inevitable factor when the instability factors incerased.The financial instability of China's financial development has not only be key issue,but also for China's macroeconomy also have very significant effect.In the current financial instability status,we try to sort out the basis of relevant theories,from the view of capital liquidity in order to establish a liquidity benchmark index system,as an important factor which will included into our research.I want to build a comprehensive indicator of financial instability using the above system.By building macro-financial instability comprehensive index system acording to China's national conditions,we use the discrete dependent variable models-Logit Model to complete construction China's financial instability measurement model system,which means from a quantitative point we have a objective assessment of China's current financial instability method.Further more,we also quantify the composite indicators within financial instability index system,in order to found the role of various indicators.From the empirical results,after the 1997 Asian financial crisis,China's financial system has been in a highly unstable state which lasted several years.Between 2002-2004,China's financial system,there have manifested a signal of instability,combined with indicators time series analysis,we further obtained a higher degree due to inflation and bank credit increased significantly.Between the year of 2004-2006,China's financial system in a relatively stable stage.In recent years,China's macro-finance shows a relative higher degree of financial instability.There is also a Probit regression analyses,which try to found the relationship between macro-financial instability degree and the related indicators,so identify the impact of China's financial instability of the mainfactors.The results show that:China's macro-financial stability depends largely on the over all macroeconomics conditions,the function of micro-finance system and some other capital mobility factors.Specifically speaking,in relation to a single group of macroeconomic variables and financial institutions variables,have no influence to macro-financial instability.This paper also found that:capital liquidity-related variables leading to the stability of the financial system is the mainfactor;only when the macroeconomic variables and financial institutions variables get together have more prominent and significant impact on the macroeconomic and financial instability.Based on the objective evaluate of China's macro-financial instability and its impact factors,were analyzed based on the Group's capital flows come to a singles calar index of the significant effects of financial instability, this paper build Vector Auto-regression(SVAR) model,then established a macro-financial instability on behalf of the indicators of capital mobility(M2/M1,M2/GDPvariable) lag correlation of the line are quations.On this basis,through the impulse response function and variance decomposition from different angles measure the macro-financial instability and capital mobility between the dynamice ffects.Through nearly ten years of China's economic empirical analysis,this paper reach the following main conclusions:Impulse response function shows that:the increase of M2/M1 ratio would make the degree of financial instability more increase.Meawhile.in recent years,the M2/M1 ratio exhibit progressively rising trend which lead excessive liquidity,there will be a major challenge in China economic.Level of financial development on the macro-financial instability in the corresponding function of the pulse shows that:in the short-term,a higher level of financial development will exacerbate financial instability.But in the long term,financial development indicators show the inverse relationship with financial instability, indicated that a higher level of financial development would reduce the degree of financial instability.so promoting our country's financial stability degree.When we related to the time-series data,China's M2/GDP ratio is too high now,indicating years of over-credit amount crowed in our bank system.Meanwhile,the banking system continue to be the accumulation of a larger long-term inflation pressures.This is also coincide with China's real current economic situation.